The Paradoxes of Green Logistics JeanPaul Rodrigue Dept

The Paradoxes of Green Logistics Jean-Paul Rodrigue, Dept. of Economics & Geography Hofstra University, Hempstead, New York, USA. Brian Slack, Dept. of Geography, Concordia University, Montreal, Quebec, Canada. Claude Comtois, Dept. of Geography, Universite de Montreal, Quebec, Canada.

Green+Logistics or Green/Logistics? n n Green Logistics Evocative concepts Origins in the environmental movement – 1990 s “the decade of the environment”. n New market opportunities – Recycling. – Transport of waste. • Environmental • Distributional n Possible convergence? efficiency • Recycling • Save time / money • Compliance Convergence?

Reverse logistics n Suppliers Customers Recycling / Reuse Supply Chain n Management of reduction and disposal Reverse distribution – Collection of damaged or unsold products. – Recycling of used products. – The manufacturer takes responsibility for delivery as well as take-back. n Disposal Two reverse channels – Recycling / reuse (back to the suppliers). – Disposal (shipment of nonrecyclable waste).

How ‘green’ is the logistics industry? Journal % environmenta l Intl. Journal of Physical Distribution 1. 7 Logistics Spectrum 1. 2 Logistics Focus 4. 8 Transportation Land Use Most important Least important n Most important issues – Reducing packaging and waste. – Hazardous waste disposal. – Solid waste disposal. – Internal costs. n Least important issues – Congestion. – Land use. – External costs.

THE PARADOXES OF LOGISTICS: costs n Driving down distribution costs – Benefits are realised by the users. – 1990 -2000 (manufacturing sector, % GDP): < < n Distribution costs declined by around 13%. Inventory costs declined by around 5%. Environmental costs are externalized – The environment or society at large pay the indirect costs. – The logistics industry has largely escaped governmental attempts to charge for externalities. < < Numerous subsidies. Trucking is less regulated. – Some estimates put costs as twice the revenue generated by vehicle taxation.

Logistical Improvements, Manufacturing Sector, 1960 -2000

THE PARADOXES OF LOGISTICS: costs n Hubbing and the land take – Airports. – Seaports. – Distribution facilities. n Feeder Hub Environmental Pressure Hubbing and local access – Road and rail connections. – Channel deepening. – High costs wholly or partially subsidized.

THE PARADOXES OF LOGISTICS: time/speed n Logistics has given rise to two fundamental features of the contemporary economy: – Just-in-Time (JIT). – Door-to-Door (DTD). – Cycle time requirements down by 25% between 1990 and 2000. n Both favour use of the least energy efficient modes: – Trucking. – Air.

THE PARADOXES OF LOGISTICS: reliability n Service reliability is at the heart of logistics – Delivery time. – Delivery on-time. – Breakage. n Modal reliability – Logistics systems use the modes perceived to be the most reliable: < Trucks and planes. – The most energy-efficient modes are perceived to be the least reliable: < Rail and ships.

LOGISTICS AND WAREHOUSING Delivery units for parts n Inventory reduction: – 1980: 50% of costs. – 1990: 44% of costs. – 1999: 36% of costs. Moving storage units Assembly and warehousing Delivery units for finished goods Moving storage units n While the manufacturers may achieve economies: – Inventories are in transit. – More links are added to the production chain, with more traffic movements added overall. – A form of externality.

Logistics Costs, United States, 1980 -1999 (in billions of $)

LOGISTICS AND E-COMMERCE Supply chain E-Retailer Warehousing Customers n E-commerce and supply chain management – Traditional marketing involves consumers going to shopping centres for their purchases. – New systems require large distribution centres on the edge of cities from which small parcels are delivered to customers. – The system uses the most polluting modes. – Disaggregation of retailing can be expected to lead to more tons/km. – Higher use of packaging, with concomitant increase in waste generation.

Environmental Vicious Circle of Logistics Application of logistics Emphasis on trucking and air transportation More ton-km transported Activities less spatially constrained Energy consumption Pollutant Emissions Congestion Space consumption Pressure on marginal land

How will logistics become greener? n Top down government intervention – The industry claims that one of the fastest growing cost of warehousing is compliance with governmental regulations. – Labor and health regulations (training). – Environmental regulations, mainly concerning dangerous substances and fuels. – Congestion pricing, road pricing (US) ‘fair pricing’ (EU). – Recent trends show an attempt by governments to internalize cots. < n Diesel fuel: Sulfur to be reduced from 500 ppm to 15 ppm. Outcomes uncertain – Policies may impact differentially on the modes. – Contradictory policies between tiers.

How will logistics become greener? n Bottom-up, industry action – Technology will improve the situation (to a limit). – Fleet management, vehicle efficiencies. – Attitudes will change; greenness can become a marketing tool. n Composite solutions – Environmental management and audit systems (EMAS). – Will the logistics industry adopt ISO 14000? n Paradoxical situation – Problems occur at all spatial scales, from the local through to the global, so a political response is inevitable. – There are hopeful signs of greener attitudes in the industry.