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Green Logistics

  1. 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
  2. Agenda • Introduction • The Emerging Global SCM Landscape • Sustainable Supply Chains: Trends and Challenges • Green Supply Chain Management • Wrap-up.
  3. 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
  4. 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.
  5. 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.
  6. © Siemens AG 2014. All Rights Reserved.
  7. © Siemens AG 2014. All Rights Reserved.
  8. 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.
  9. 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
  10. © Siemens AG 2014. All Rights Reserved.
  11. 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
  12. 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
  13. 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.
  14. 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.
  15. 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.
  16. 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
  17. 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.
  18. 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.
  19. 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.
  20. 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
  21. 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
  22. 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.
  23. 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.
  24. 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.
  25. 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).
  26. 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
  27. Wrap up • Clear trend toward sustainable strategies • Sustainability  Core business • Leading Organizations show the way
  28. Green Logistics Thank you for your attention!! Prof. Dimitrios Vlachos Γενική Συνέλευση Ένωσης Βιομηχανιών Ηλιακής Ενέργειας, ΔΙΠΑΕ, 11 Ιουλίου 2016