Army National Guard's (ARNG) 2010 Logistics
Management Seminar (LMS)
Louisville, KY, May 10-14
Green Logistics and its
Paradoxes:
What Drives Supply Chain
Management?
Jean-Paul Rodrigue
Associate Professor, Dept. of Global Studies &
Geography, Hofstra University, New York, USA
What Drives Supply Chain Management?
A Paradigm and Its Externalities: The Environmental
Vicious Circle of Logistics
Paradigm
Added value
Efficiency
Control
More ton-km
transported
Less spatial
constraints
Energy consumption
Pollutant emissions
Network changes
Space consumption
Externalities
Network Changes: Hub-and-Spoke Network and
Externalities
Rationalization
Improvement of system-wide
performance
Concentration of externalities
Local / regional pressures
Increased vulnerability to disruptions
Hub
Feeder
The Commercial Gateways of the Global Economy
39 Gateway Regions
90% of the World’s Freight Transport
Pearl River Delta: 16.7%
Land Requirements for Freight Distribution: A Form
of Externalization
Transportation
Freight Village
Terminals
Networks
Roads / lines
Rights of way
1
1
Outdoor
Storage
2
Port terminals
Rail terminals
Airports
Inventory at terminal
Storage
Energy
2
Warehousing
Distribution centers
Cross-docking
Inventory in transit
Willow Springs Freight Distribution Center Site,
Chicago
N
The Pitfalls of Green Logistics: Trying to be Green
Leads to Being in the Red
■ Green Logistics
•
•
•
•
•
•
The bulk of “greenness” is actually regulatory compliance.
Asymmetric (impact more some than others).
Arbitrary cost structure.
May cost a lot of green… and put you in the red…
Green plus red equals brown…
Possibly unsustainable.
Compliance
Costs
“Brown” Logistics
Regulations
Potential Impacts of Energy and Environmental
Issues on Freight Distribution
1. Principle of “Demand Destruction”
Quantity
Q1
ΔQ
Q2
ΔP
P1
P2
Price
Change in Vehicles-Miles Traveled and Nominal Spot
Oil Prices (Crossing the Threshold)
8.0%
140
OS(1)
OS(2)
CS(1)
YOY Change in Vehicle-Miles Traveled
West Texas Intermediate, Monthly Nominal Spot Oil Price
120
6.0%
100
4.0%
80
2.0%
CS(2)
0.0%
60
CS(3)
40
-2.0%
-4.0%
OS(3)
CS(4)
20
0
Breaking the Comparative Advantages Threshold
Costs of Shipping a 40 foot Container From China to the American
East Coast
$16,000
$14,000
From China
From Mexico
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2000 ($30
barrel)
2005 ($56
barrel)
2008 ($135
barrel)
($150 barrel)
($200 barrel)
Containerization Growth Factors: Which
Opportunities are Left?
A
Derived / Organic
(A)
Economic and income growth.
Globalization (outsourcing and global sourcing).
Fragmentation of production and consumption.
Substitution (B)
Functional and geographical diffusion.
New niches (commodities and cold chain)
Capture of bulk and break-bulk markets.
Incidental (C)
Trade imbalances.
Repositioning of empty containers.
Induced (D)
Transshipment (hub, relay and interlining).
B
C
D
2. Principles of Modal Shift
Modal Share
A/B
ΔP
(A/B)2
ΔQ(A/B)
(A/B)1
P1
P2
Price
Distance Travelled for One Ton of Cargo Using One
kWh of Energy
Post- Sovereign Class Containership
Sovereing Class Containership (8,000 TEU)
Rail (Electric)
Rail (Diesel)
Heavy Truck
Boeing 747-400
0
10
20
30
40
KM
50
60
70
80
Logistics, Modal Shift and Intermodal Integration
Freight Transport Costs in Cents per Ton-Mile
0.7
0.588
0.6
INTERMODAL INTEGRATION
0.5
0.4
Drayage
0.3
0.251
0.2
0.1
0
Domestic Rail
Short Sea Shipping
0.007
Water
0.025
Rail
Road
Air
Share of the Northeast Asia – U.S. East Coast Route
by Option
100%
90%
3.0%
2.1%
11.3% 15.1%
2.0%
20.8%
80%
4.6%
1.5%
0.9%
1.8%
2.0%
2.0%
23.6% 33.8%
38.2% 40.1%
42.0% 43.0%
70%
60%
Suez Canal
Panama Canal
Intermodal
50%
40%
30%
85.7% 82.8%
77.2%
71.8%
64.6% 60.9%
58.1% 56.0% 55.0%
20%
10%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007
3. Service Area Changes
Cost
ΔR(B)
ΔB
ΔA
A
B
R2
R1
Range
Optimal Location and Throughput by Number of
Freight Distribution Centers
4. Gateway / Hub Selection
A
C
B
Transit Times from Shanghai and North American
Routing Options (in Days)
Prince Rupert
12
Vancouver
4
13
8
5
Seattle / Tacoma
Toronto
Oakland
13
5
Chicago
3
26 New York
Los Angeles
25 Norfolk
Atlanta
5
14
Dallas
5
Savannah/Charleston
25
28 Houston
8
19
Lazaro Cardenas
22 Panama
Gateway and Hub Selection is Controlled by Private
Commercial Interests
Container Terminals of the World's
Four Major Port Holdings, 2009
5. Network Configuration
Rail
Road
Distribution based on RDCs
Distribution based on tiered system
Distribution based on two gateways
Distribution based on local DCs
BNSF Logistics Park, Chicago
Distribution Centers
BNSF Intermodal Yard
Maersk
Wal-Mart
California
Cartage
6. Supply Chain Propagation: Input Costs or
Transport Costs?
Input costs
Transportation
costs
Raw
Materials
Manufacturing
Reverse Distribution Costs
Distribution
Centers
Retailers
American Foreign Trade by Maritime Containers,
2008 (in TEUs): Reverse Distribution on Steroids
Importers
Exporters
Whirlpool
JC Penney
Nike
Red Bull
Samsung
Jarden
General Electric
Ashley Furniture
Ikea
Heineken
Chiquita
Philips
LG Group
Lowe's
Costco Wholsale
Dole Food
Sears Holding
Home Depot
Target
Wal-Mart
Newport Chinternational
Sims Metal Management
CGB Enterprises
Denison
JC Horizon
ExxonMobil
Delong
BASF
Archer Daniels Midland
Cedarwood-Young
Meadwestvaco
Procter & Gamble
Potential Industries
Dupont
Dow Chemical
International Paper
Koch Industries
Cargill
Weyerhaeuser
America Chung Nam
0
200,000
400,000
600,000
800,000
0
200,000 400,000 600,000 800,000
Logistical Strategies to Cope with Energy and
Environmental Constraints
Shipping
less
Demand responsive systems. Reduce
returns.
Changing
suppliers
Reassessing sourcing both at the global
and domestic levels.
Shipping
scheduling
Allow greater shipping time and outside
rush periods.
Efficient
packaging
Reduce the shipment size (volume) of the
same load.
Modal shift
Use a mode or a route that is more energy
and environmentally efficient.
“Double Green” Logistics
■ The “double green” concept
• Environmental endeavors that are not grounded in efficiency
and productivity improvements are bound to fail, unless
subsidized (which also leads to failure).
• Green logistics is rife with unintended consequences
(complex system).
• Greenness, particularly if regulatory (compliance) based, may
be unsustainable.
Distributional
Efficiency
Environmental
Performance
Green Logistics
The Paradoxes of Green Logistics
Dimension
Outcome
Paradox
Costs
Reduction of costs through improvement in
packaging and reduction of wastes.
Benefits are derived by the distributors.
Environmental costs are often externalized.
Time /
Flexibility
Integrated supply chains.
JIT and DTD provide flexible and efficient
physical distribution systems.
Extended production, distribution and retailing
structures consuming more space, more energy
and producing more emissions (CO2,
particulates, NOx, etc.).
Network
Increasing system-wide efficiency of the
distribution system through network changes
(Hub-and-spoke structure).
Concentration of environmental impacts next to
major hubs and along corridors.
Pressure on local communities.
Reliability
Reliable and on-time distribution of freight
and passengers.
Modes used, trucking and air transportation, are
the least environmentally efficient.
Warehousing
Less warehousing per unit of freight.
Inventory in circulation.
Inventory shifted in part to public roads (or in
containers), contributing to congestion and
space consumption.
E-commerce
Increased business opportunities and
diversification of the supply chains.
Changes in physical distribution systems
towards higher levels of energy consumption.