Responsiveness to Green Strategy

If the basic characteristics of logistical systems are analyzed, several inconsistencies with regards to environmental compatibility become evident. Five basic paradoxes are as follows:

• Costs pressure—The purpose of logistics is to reduce costs, notably transport costs. In addi­tion, economies of time and improvements in service reliability, including flexibility, are further objectives. Corporations involved in the physical distribution of freight are highly supportive of strategies that enable them to cut transport costs in a competitive environment. On some occasions, the cost-saving strategies pursued by logistic operators can be at variance with environmental considerations. Environmental costs are often externalized. This means that the benefits of logistics are realized by the users (and eventually to the consumer if the benefits are shared along the supply chain), but the environment assumes a wide variety of burdens and costs. Society in general, and many companies in particular, are becoming less willing to accept these costs, and pressure is increasingly being put on governments and cor­porations to include greater environmental considerations in their activities.
• Time compression—In logistics, the thumb rule is that time is equal to cost. By reducing the time of fl ows, the speed of the distribution system is increased, and, consequently, its effi ciency. This is achieved in the main by using the most polluting and least energy-effi cient transportation modes. The signifi cant increase of air freight and trucking is partially the
  result of time constraints imposed by logistical activities. The time constraints are themselves the result of an increasing flexibility of industrial production systems and of the retailing sec­tor. Logistics offers door-to-door services, mostly coupled with just-in-time strategies. Other modes cannot satisfy the requirements such a situation creates as effectively. This leads to a vicious circle. The more door-to-door and just-in-time strategies are applied, the further the negative environmental consequences of the traffic it creates through road transportation.

• Reliability in service—At the heart of logistics is the overriding importance of service reli­ability. Its success is based upon the ability to deliver freight on time with the least threat of breakage or damage. Logistics providers often realize these objectives by utilizing the modes that are perceived as being most reliable. The least polluting modes are generally regarded as being the least reliable in terms of on-time delivery, lack of breakage, and safety. Ships and railways have inherited a reputation for poor customer satisfaction, and the logistics industry is built around air and truck shipments that are the two least environmentally friendly modes.
• Warehousing decisions—Logistics system’s economies are based on the reduction of inven­tories, as the speed and reliability of deliveries removes the need to store and keep excess stocks. Consequently, a reduction in warehousing demands is one of the advantages of logis­tics. This means warehousing on wheels. Inventories are in transit, contributing still further to congestion and pollution. The environment and society, not the logistical operators, are assuming the external costs.
• Internet explosion—The explosion of the Internet has led to new dimensions in retail­ing. This is made possible by an integrated supply chain with data interchange between suppliers, assembly lines, and freight forwarders. The distribution activities that have ben­efited the most from e-commerce are parcel-shipping companies such as UPS and Federal Express that rely solely on trucking and air transportation. Information technologies related to e-commerce applied to logistics can obviously have positive impacts.

The actors involved in logistical operations have a bias to perceive green logistics as a means to internalize cost savings, while avoiding the issue of external costs. These observations support the paradoxical relationship between logistics and the environment that reducing costs does not neces­sarily reduce environmental impacts.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.