GREEN LOGISTICS
Prof. Dimitrios Vlachos
Director, Industrial Management Division,
Department of Mechanical Engineering,
Aristotle University of Thessaloniki, Greece
President, Supply Chain Management
Association of Northern Greece
Γενική Συνέλευση Ένωσης Βιομηχανιών
Ηλιακής Ενέργειας, ΔΙΠΑΕ, 11 Ιουλίου 2016

Agenda
• Introduction
• The Emerging Global SCM Landscape
• Sustainable Supply Chains: Trends and
Challenges
• Green Supply Chain Management
• Wrap-up.

The New Era of Globalization
• Global financial flows are 70% below their peak
• Rising wages in China & shifting energy dynamics pose
new challenges to lengthy SCs (nearshoring, reshoring
etc.)
• Cross-border flows rose from $26 trillion in 2012 and
could triple by 2025
• New dramatic changes in the mixture of flows
• Emerging players are becoming sources of innovation,
production and consumption
• Digitization enables companies to “glocalize” at low cost
(hyperscale business).
Source: McKinsey, February 2015

The Global SCM Landscape (1/2)
• Global markets at an all-time high in volatility.
• Outsourcing has stretched SC’s thin.
• Globalization and interconnectivity create a ripple
effect
• SC risk impacts can affect national & global
economies.
• Widespread adoption of “lean” practices.

The Global SCM Landscape (2/2)
• Outsourcing and reduction of supplier base
• Global consolidation of suppliers
• Centralized Production and Distribution
• Increased Risk/Disruptions
• The C-level executive agenda has evolved
accordingly.

© Siemens AG 2014. All Rights Reserved.

© Siemens AG 2014. All Rights Reserved.

Digitizing the Value Chain
• Digital Manufacturing and Design are drawing
attention from innovators and investors alike
• “Industry 4.0” in the EU
• “Industrial Internet” (GE’s term)
• A basket of new technologies that encompass
advances in manufacturing (3-D printing,
adaptive CNC mills, robotics), smart finished
products (using the IoT) and data tools and
analytics throughout the value chain.

The Internet of Things Gains Momentum in Manufacturing
• Smart Manufacturing: Applying IoT to production
processes to increase production output, product quality
and lower resource consumption
• Connected Products: Applying IoT to vehicles and
machinery to impact product performance collecting data
in the field, remote diagnostics, maintenance, etc.
• Connected Supply Chains: IoT for increasing visibility &
coordination in the SC, tracking assets (containers,
trucks,…) or inventory for more efficient SC execution &
integrated business planning
Source: IDC Manufacturing Insights, 2015

© Siemens AG 2014. All Rights Reserved.

Industry 4.0 & Cyber-Manufacturing
Transformation
of Organisation
 Hierarchical Control Paradigm
 Deterministic
 Corporate-fit by Customizing
 Application-specific Solutions
 Flexible and Adaptive
 Non-deterministic
 Highly Decentralized
 Service-based Customising
Industry 4.0
Traditional System
Migration
Cyber Physical Systems
ERP
Operational layer
Command layer
Internet of Things
Cyber Physical Systems
Internet of Services
Cloud, BOs & BigData

Responsible Supply Chains (1/2)
• “We are in the middle of a paradigm shift. Consumer
pressure, fuelled by social media, is driving
commercial organizations to do more than pay lip-
service to the global socio-environmental impact of
their supply chains.
• …This is no longer about risk mitigation, even though
that is important; it is about a structural change in
the way in which companies gain and maintain
competitive advantage.”
Source: World Economic Forum, January 2015

Responsible Supply Chains (2/2)
• Companies need to move from pure efficiency-driven
SC strategies to more holistic concepts to obtain “triple
supply chain advantage” by achieving:
– (i) Profitability, while benefiting
– (ii) Local Development and Societies; and
– (iii) the Environment.

CDP Supply Chain Report 2015 (1/3)
• 66 Member Elite global players with $1.3 trillion in
procurement of goods and services
• Dell, Walmart, Coca-Cola, Ford, Siemens, Philips
Electronics, Johnson & Johnson, Microsoft, Vodafone
Group, Unilever, Nestle, Goldman Sachs, L’Oreal, …
• Based on responses by 3,396 of their suppliers
worldwide, on how they approach climate and water
risks and opportunities.

CDP SC Report 2015 (2/3)
• Climate change warnings are growing more dire &
global business leaders even site water crises and
extreme weather as top economic risks
• Still, SCs leading to many of the world’ s biggest
companies pay only mild attention
• Only 22% of suppliers are implementing low-carbon
energy projects
• 33% of suppliers report their emission reduction
initiatives led to monetary savings.
• Suppliers from China, US, Brazil and Italy lag behind:
they have a high level of climate risk but they have not
responded adequately.

CDP SC Report 2015 (3/3)
“…Forward-looking companies appreciate that
successful, resilient suppliers are good for business.
Suppliers have come to realize that improved
performance can confer competitive advantage not
only making them more efficient but also more
attractive to sustainability-inclined customers”.
Christina Figueres, Exec. Secretary,
UN Framework Convention on Climate Change

Working CSR into the Supply Chain
• Today’s CSR focuses on: risk reduction, nimble
reaction to problems, innovation (green
materials, carbon footprint optimization, etc.),
stakeholder engagement & crisis management.
• Companies are now concerned along with
natural resources, with human rights, labor
practices, corporate governance and business
ethics.

Green is Serious Business
• Are customers willing to buy green products at
higher costs?
– Walmart’s “Sustainability Leaders Shop”/on line
shopping portal (March, 2015)
• Emissions of Gases (esp. CO2) have emerged as
the main issue (but also water footprint…)
• Green => Lean (it saves money!)
• A cacophony of many initiatives and carbon
trading are upcoming
• Addressing green aspects is vital for building new
infrastructure within the EU.

The Emergence of Green SCs
• 80% of the Global Fortune 250 firms release their annual
sustainability report, up from 37% in 2005
• “A New Green Wave” (Jane Nelson, Director, CSR Initiative,
Harvard, 2014): e.g. Unilever and SABMiller
• Sustainability reports of elite companies document that the
greening of their SCs has helped them reduce their
operating costs with increased sustainability of their
business
• Sustainability has emerged as a Profitability Center.

Sustainability Rising at C-level
• According to executives,
sustainability is becoming
a more strategic and
integral part of their
businesses.
• CEOs are twice as likely
as they were in 2012 to
say sustainability is their
top priority.
Source: McKinsey Global Survey results 2014

Influence of CSOs is Growing
• Sustainability leaders have:
– Increasing executive committee influence, decision-making
authority and budgetary contributions across initiatives
spanning:
– Assurance, Consulating, Energy Management, Natural
Capital, Reporting and SCM
• 92% of responding firms have a Sustainability officer who
reports to the CEO or another member of the executive
committee.
• CEOs increasingly recognize that Sustainability impacts financial
performance.
Source: Verdantix, November 2014

Need for Comprehensive Frameworks
• Need to assess the impact of GSCM decisions holistically,
through the identification of their interactions with other
decisions; i.e.:
• Decisions on refurbishing locally may affect reverse logistic
network design decisions.
• Manufacturing planning decisions may affect inventory and
transportation planning decisions.
• Inventory planning decisions may affect transportation
planning decisions.
• Transportation mode selection could affect facility location
decisions.

Green Supply Chain Management
• Managing all stakeholders of the Supply Chain where
we take environmental aspects and long-term
efficiency into account
• Main elements:
– Green Supply Chain Planning
– Green Procurement and Sourcing
– Green Supply Chain Execution
– Carbon Management
– Green Supply Chain Performance Evaluation.

Green Logistics
• Logistics covering the management of the
movement of goods through the supply chain
• Green Logistics has attracted by far the most
attention of GSCM
• Elements:
– Transportation
– Facilities
– Products
– Reverse Logistics.

Issues with Green SCM
• Transportation is more under pressure than consumption
– Logistics contributes 5.5% of total GHG emissions
– Transportation responsible for 89% (rest due to warehouse
and distribution facilities)
– Road freight is responsible for more than 50% of CO2
emissions in the transport sector, ocean for 20%, rail and
air for the remainder.
• Difficulties on building consensus at the global level…
• EU’s Emissions Trading Scheme (ETS) an abysmal failure;
“Worse than Useless!” (The Economist, January 2014).

Key Steps towards a Green SC
1) Optimize routing and consolidation
2) Improve fleet visibility
3) Automate tasks and communication
4) Improve packaging strategies
5) Enact energy conservation strategies in the warehouses
6) Improve labor management processes and practices
7) Increase global transport efficiency.
Source: SCDigest, RedPrairie

Wrap up
• Clear trend toward sustainable strategies
• Sustainability  Core business
• Leading Organizations show the way

Green Logistics
Thank you for your attention!!
Prof. Dimitrios Vlachos
vlachos1@auth.gr
Γενική Συνέλευση Ένωσης Βιομηχανιών Ηλιακής
Ενέργειας, ΔΙΠΑΕ, 11 Ιουλίου 2016