Green Logistics

Almost all major Consumer Goods (CG) companies focus on long term and result oriented sustainability initiatives.
The approach they adopt tries to align their values and principles with these initiatives. These initiatives are slowly
going beyond the core manufacturing processes, and taking a holistic approach - one that encompasses
organization, people, process, and technology. Consumer Goods companies are trying to engage stakeholders to
identify issues and provide input on specific areas. They stand answerable and accountable to customers,
employees, suppliers and others, such as governments and regulators, local communities. Continuous pressure
from stakeholders and regulators is playing a major role in driving the Consumer Goods companies to adopt a more
environment friendly approach. Implementing sustainable processes and technologies face tremendous challenges.
Organizations still have the impression that most of the sustainability initiatives lead to higher cost. This limited
view comes in most instances from a lack of information on best practices, including, for example, the long-term
benefits resulting from improved distribution efficiencies, and compliance processes. More specifically, CG
companies that have moved to advanced logistics modeling and product lifecycle management are now
seeing a results orientation that others might want to study more carefully and possibly look to emulate.
 Table of Contents
1. Introduction 3
2. What is Green Logistics 4
3. Drivers for Green Logistics 5
4. Network Optimization 8
5. Packaging Reduction 9
6. Warehouse Layout Optimization 10
7. Sustainable Procurement 12
8. IT Solutions to enable Green Logistics 13
9. Environmental Benefits of Green Supply Chain Best Practices 16
10. Business benefits of Green Supply Chain Best Practices 17
11. Challenges 18
12. References 18
 Green Logistics

Introduction
Logistics is the terminology used to describe the transportation, storage and handling of products as they move from
the source of raw materials, through the manufacturing system to their final point of sale from where the purchase
happens for end consumption. The associated reverse supply chain is also considered.
Logistics is made up of the following activities:

Goods transport
Storage
Inventory Management
Overall materials handling
Related information processing

The major activities of logistics have been the key to economic development and social well-being. It has been
more than 50 years since logistics has come to be considered as a key criterion of business performance, a separate
profession and a major field of study for the academicians. However, in this period logistics has been managed and
studied for purely commercial reasons. Monetization and adding more to the purse has been the sole motive of the
logistics professionals.

The flip side has been that over all these years the social and environmental costs which are key components of
logistics have been ignored. It is only over the last few years that the concern for the economy has slowly grown.
 Green Logistics

What is Green Logistics?

The last decade has seen a tremendous increase in the public and government concern for the environment. As a
result there has been an excessive amount of pressure on major firms to reduce the environmental impact of their
logistics operations. This has risen to a varied impact, in terms of the choice of externalities and the distances over
which their undesirable effects are felt. Transportation of goods has a negative impact on the local air quality,
generates noise pollution, leads to accidents and, in totality, makes a noteworthy input to global warming.
The impact of logistics on weather change has called for increasing attention in recent years, partially because
increasing controls on pollution and road safety improvements have alleviated the other environmental problems.
Also, new scientific research has exposed that global warming presents a much greater and more instantaneous
threat than earlier thought.

It is expected that goods transportation accounts for around 8% of energy-related Carbon Dioxide emissions
worldwide. The inclusions of warehousing and freight management are likely to add another 3% to this total. Making
logistics sustainable in the longer term will involve more than cutting carbon emissions. Despite recent
improvements, the potential still exists to cut the other environmental costs of logistics by a significant margin.

The main objective of logistics is to co-ordinate these activities in a way that it meets customer requirements at
minimum cost. In the past this cost has been defined in purely monetary terms. As concern for the environment rises,
companies must take more account of the external costs of logistics associated mainly with climate change, air
pollution, noise, vibration and accidents. This research project examines ways to reduce these externalities and
achieves a more sustainable balance between economic, environmental and social objectives.
 Green Logistics

Drivers for Green Logistics

This section describes the various drivers for Green Logistics.

Mounting energy costs:

Increasing power and fuel costs, together with the cost of related raw materials used in infrastruc ture building and
functioning has led to chances for looking into green alternatives that can significantly lead to a reduction in the price.
Reducing the power consumed by IT apparatus, energy efficient lighting and cooling, substitutive energy sources,
recycling and tele-presence can help develop the bottom line in business financial sheets.

Worldwide alarms among corporate over GHG (Green House Gases) emissions:
Many corporate policies now consist of targets for decreasing their impact on the surroundings. With IT equipment,
infrastructure and people having a significant footprint in any business today, identifying and lowering its impact is
becoming very important. Green IT is thus as important to an industrial manufacturer as it is to a telecom or an IT
services organization.

Climate change:
Global Warming impacts weather, ice-caps and glacier. On an average, mountain glaciers and snow cover have
reduced in both the northern and southern hemispheres. This widespread lowering in glaciers and ice caps has
contributed to observed sea level rise.

Regulations such as EPA (Environmental Protection Agency),

RoHS (Restriction of Hazardous Substances) and so on
The environmental policies in diverse geographies can be largely classified as regulatory (bans, permits and
standards), financial (gains for adherence and reduction) and educational (environmental reporting, audits, product
labeling and so on). Green IT knowledge and concerns are leading to the development of legislations along all these
areas. Assortments of IT hardware in an organization need to follow certain specifications to obtain Energy Star
Ratings. This has been effective in the US since 2007.Controlling the carbon trace of IT is also becoming significant for
getting environmental certifications. Penalization by policing agencies to implement carbon credit obedience is
another inspiring factor for Green IT initiatives. Many inducements are being provided by the governments (tax
incentives) and service companies to embark on projects such as cooling system retrofits, apparatus consolidation
and self-generation through interchangeable sources to make up for some of the savings costs for commissioning
these transformations.

Improved community awareness of environmental issues

Widespread consciousness is likely to lead to privileged choices in vendor selection based on Green IT practices.
A flourishing Green IT tactic is largely reliant on an end-to-end obedience across supply chains, along-with sharing
the best procedures in companies across the supply chain.
 Green Logistics

Impact on the Environment at various stages of Supply Chain

The following diagram depicts a Product Lifecycle from the conception to the disposal stage of a typical CPG
company.

The early stages of conceptualization and design of a product happens within closed doors. This is followed by the
usage of water and energy. In stages such as raw material extraction, manufacturing, transportation and disposal,
the output (air, water and waste) cruelly impacts the surroundings.

The major Consumer Product companies are looking for a greener supply chain to reduce the environmental impacts
and offer an eco-friendly service to end consumers.

This paper focuses on one of the areas in green supply chain, namely, Green Logistics.

Following are the four areas wherein a successful green logistics implementation can have a positive impact on the
overall Supply Chain of the organization:

Network Optimization
Packaging Reduction
Sustainable Procurement
Warehouse Layout Optimization
 Green Logistics

The following chart depicts the positive impact on the environment for each of the areas as we put into practice the
techniques of green logistics.

7
 Green Logistics

Network Optimization
Network optimization is the most fundamental type of modeling that can be done to optimize the hierarchy and
inter-related transportation flows that can bring considerable cost and carbon reduction in the supply chain processes
of a consumer packaged goods company.

Clogging is supposed to originate amplified emissions in two ways, which are as follows:
Directly through increased emissions per kilometer (km) when vehicles are moving at unproductive speeds
Indirectly through increases in the number of expedited orders and through re-routing of vehicles.

Research shows that restructuring the network can give an 11% cost and a 10% CO2 emission reduction.
Some of the key steps in network optimization through the green logistics route include the following:

Lowering the distance travelled by a product in the supply chain.

Increasing local sourcing might increase the costs of raw materials, but this could be more than balanced by
reducing the distance travelled, which in turn, would lessen carbon footprint and shipping costs.
It will also trim down contact to supply chain risks together with unpredictable fuel prices, long and erratic
lead times, and currency exchange risks.
Using superior vehicle technology and design can also perk up fuel efficiency and reduce the total costs.
Replicating with carbon footprint and limiting considerations including facilities, inventory, manufacturing
conversion, and so on to develop a strategy that considers ecological factors apart from costs using carbon
constraint-based solutions.

So a win-win situation may well be possible, reducing emissions and reducing total supply chain cost.
Network optimization can be taken to the next level to realize additional Green benefits in multiple areas,
which are as follows:

Hedge against increasing energy expenses by structuring the complex network .

Move towards stable and expected energy costs.
Trim down GHG emissions that can improve public image.
Reduce distribution and shipping costs.
Develop distribution and manufacturing flexibility.
Develop an action plan for varying amenities, inventory policies, associates, and so on, derived from looking
Into risks, opportunities and trends.
 Green Logistics

Packaging Reduction
Packaging is an extremely noticeable shopper marketing tool, but it is also a momentous cost to the supply chain,
accounting for up to 12 percent of the charge of many typical consumer goods. This grouping creates an ultimate
opening for Consumer Goods companies to move towards a greener supply chain and force brand growth by moving
to a more sustainable methodology for packaging strategy.

Benefits of Packaging Reduction:

• Sustainable packaging programs can make a considerable involvement to carbon reduction across the supply
chain .
• Strategies such as packaging elimination, light-weighting and the selection of alternative resources help
consumer goods companies to have an overall cost reduction.

Green Packaging:
'Green' packaging includes methods of conceptualizing products that takes into account
conservation of the environment. It also considers the product's impact on the surroundings at all stages of its life
cycle. For example, implementing green packaging techniques enables us to use recyclable or biodegradable
material for packaging. Likewise, there are washing detergents that are efficient in cold water, thus reducing the energy
consumption of a washing machine.

The future of 'green' packaging would make it possible to reduce the mass of packaging materials such as a soda
bottle. Green packaging holds enormous promise through material quantity reduction, but what has to be kept in
mind is that it is more difficult to recycle thin or light packaging (thin plastic film) than heavy packaging (glass).
Packaging now represents 23% of the waste weight and 37% of waste volume. So the key concern is solving
consumer's perceptions of packaging waste. For consumers it is a packaging invasion, to have to sort through more
and more stuff every day, from metal to paper, to plastics. However, it is more ecologically reasonable to sell packaged
juices in clusters – in spite of a more downbeat consumer perception.

Though this daily process frustrates the consumers, it has also created a huge prospect for brands. It is time to push
eco-design further, looking more profoundly and accurately at manufacturing, product design, logistics, retail, and
user behavior. It needs to become about improving ergonomics and use, supporting reduction and rec ycling,
developing alteration, and promoting recycle.

Implementing 5Rs for a Greener Planet

Following are the 5Rs that have to be implemented for a greener planet:

Rethink - Investigate consumer behaviors and expectations (how they think, what they need and want) to provide
choices about the cycle of the product and packaging. This research can then be used as a pathway for all engineers,
marketers, and designers.

Re-engineer - Study packaging, manufacturing, logistics, retail, and user constraints, concerning both engineering
and marketing fields before briefing designers.
 Green Logistics

Remove - Optimize packaging layers to accomplish manufacturing, logistics, retail, and user expectations without
losing the key packaging functions (which often have multiple uses).

Reduce - Act to decrease packaging material without affecting the product performance during its production,
transport, distribution, and use phases.

Recycle - Consider the life cycle of product packaging to improve how used material re-enters the process at the end
of the cycle, especially from a user point of view.

5Rs and brand value - In FMCG, things are moving fast in the area of eco-design packaging. It has been seen that
businesses are employing the 5Rs, - and integrating them into the packaging design approach. Businesses are
realizing that this type of thinking not only creates value for just the consumers, but also for the brand.

Warehouse Layout Optimization

Warehousing forms an important part in the CG industry and is a key to the logistics space. A surplus of techniques
and technologies are available today to warehouse owners to drastically reduce the impact of their buildings on the
environment.

Following are a few examples:

Construction materials : Using recycled concrete, steel, asphalt, and other resources in new warehouse n
construction delivers noteworthy environmental benefits, as does providing construction waste to recycling
companies. Manufacturers can also make an effort to use supplies that are manufactured or produced locally.

Day-lighting : Installing skylights and clerestory windows in distribution amenities allows companies to use
natural light as a basis of interior illumination. Day-lighting harnesses the power of the sun, reduces electricity
usage and carbon dioxide emissions, and improves indoor environmental quality for warehouse employees. By
means of daylight dimming, switching and using motion sensors in offices an estimated 50% of electricity can
be saved.

Lighting systems : Occupiers can reduce a facility's total energy consumption by installing energy–efficient
lighting systems. Warehouses conventionally employ metal halide lighting, but commercially available T5 and
T8 fluorescent lights last longer and drastically reduce current usage, although for a higher front–end
investment. Energy efficient warehouse lighting has a 1 year payback period.

High-reflectance roof membranes : Customarily, warehouses have been built with Ethylene Propylene Diene
Monomer [EPDM] (M-class) rubber, rubber roofing membranes, which are black and which absorb heat and
sunlight. But white Thermoplastic Polyolefin (TPO) roofing offers the same performance at essentially the same
cost, with the added benefit of reducing a building's load on its cooling system.
 Green Logistics

The Next Level

Methodologies like those listed above are both meaningful and practical; they provide real paybacks to the
environment without commanding a giant up–front economic burden on warehouse developers. Over a long period,
however, regulators and customers can be anticipated to raise the level on builders, pushing for higher ecological
performance from their facilities. To move forward, the industry will need to triumph over one of the largest handicaps
it faces in this area today - a shortage of hard data that quantifies the costs and payback of individual environmental
building features.

The Consumer Goods industry that uses these warehouses needs to develop a regular, metrics-based approach that
enables an apples-to-apples assessment of sustainable technologies in a methodical manner.

The large arrays of sustainable technologies and design features that can be incorporated for a long term impact are
as follows:
There should be improvements focused on the energy performance of the amenities, such as external building
fabrics that lower air leakage and loss of energy, and improved skylights that enhance natural lighting and
lower consumption of electrical power.
Consumer Goods companies should start including renewable energy systems, such as roof-mounted solar
panels, heat-absorbent solar walls, and solar thermal hot water systems.
Third-party engineering consultants can be brought on-board to check and examine the costs and paybacks
of the variety of features that are planned to be included.

Finally no industry can be really called sustainable unless it remains cost effective and continues to convey a good
return to investors. That idea is at times lost in the debates and deliberations that take place about sustainability
today. However, better information and a scientific methodology should enable our industry to focus on those
techniques and technologies that deliver the highest impac t at the lowest cost, civilizing the world we live in without
lowering business performance and the bottom line.
 Green Logistics

Sustainable Procurement
The approach for 'green' procurement should include organization, people, process and technology. It should be
treated as a vehicle that provides value, achieves better economics, enhances the brand image and benefits the
environment. Through various sustainable initiatives, procurement organizations can realize incremental savings up
to 12 % of cost. These initiatives can include energy, supply, operations and logistics.
The principle of sustainable 'green' procurement is based on the outlook that CG companies can derive benefits from
the areas of economics, environment, and society. Also, numerous studies conducted regarding the benefits of a
'green' procurement strategy have found common factors in above mentioned areas.

The following figure lists some of the fac tors for each of these components.
 Green Logistics

IT Solutions to enable Green Logistics

IT has always played a substantial role in most of the new initiatives adopted by organizations. Similarly, for the
success of green initiatives, it can play a key role in ensuring that the desired goals are achieved and are reaping the
expected benefits.

Supply Chain Optimization :

Information Technology can play a critical role in optimizing transportation routes and
ensuring that goods are delivered in a manner which is energy efficient as well as cost-effective. Transportation
managers can mitigate the effects of unexpected events by automating the transportation planning process.
TCS provides transportation planning solutions to optimize operations, identify non-value added manual processes,
implement dashboards for metrics, and utilize the proven principles of Six Sigma and Lean Manufacturing to identify
hidden variance and complexity within the supply chain.

Some organizations have developed Business Modeling software based on the SCOR (Supply Chain Operations
Reference) framework (documented by the Supply Chain Council) to enable efficient planning of supply chain
functions. TCS, as an organization can implement this methodology too.

Green Supply Chain Realization :

Information Technology can enable reduction in resource usage while business
processes are executed by streamlining business processes. For example, visibility solutions provided by TCS to
leading logistics players for asset tracking helped them reduce resource consumption while achieving higher service
levels.

Automation for permitting end-to-end paperless processes can play a major role in reducing waste. To achieve this,
Mobility Solutions that can enable dynamic scheduling of transportation tasks and real-time tracking are required.
Mobility Solutions are those that work as a platform for collaboration of documents as well as providing a robust
internal and external mailing system.

These solutions can help firms in achieving paperless processes, thereby reducing the need for paper and the need for
printing, stocking and transporting the paper based work orders. This in turn can result in reducing a Consumer Good
Manufacturer's expenses on natural resources that are exhausted for maintaining the paper-based process of its
business.

RFID (Radio Frequenc y Identification Device) technology can also be a huge enabler for Green Supply Chain
management strategies. RFID-enabled tracking of energy footprint data can allow Consumer Good companies to
understand the 'who, why and how' of a product that reached a particular stage in the supply chain. RFID tags can
carry information related to carbon footprints and can help organizations to analyze and monitor their supply chains
from different environmental perspectives. At TCS, there is a dedicated Center of Excellence for RFID that has helped
the implementation of RFID solutions for leading logistics providers and retailers.

Green Supply Chain Collaboration :

IT solutions which provide an environment with the involvement of all partners in the supply chain will
definitely help organizations achieve better utilization of transportation assets. More importantly this will reduce
overall energy requirements. TCS recognizes the need for collaboration in transportation management
to help organizations achieve end to end supply chain sustainability and cost efficiency, while ensuring
customer satisfaction, advance supply chain network modeling and optimization becomes crucial.
 Green Logistics

Collaborative planning forecasting and replenishment are other areas where IT can add value. Effective usage
of these techniques will result in higher accuracy of forecasting thus reducing the resources consumed in production.
TCS has worked with leading retailers by providing solutions to facilitate the collaborative planning, forecasting and
replenishment process thereby reducing the impact of supply chain operations on the environment.

Disposal :
Simpler rec ycling and disposal processes have gained importance due to regulations passed by various
governments directed to reduce the impact business has on the environment. Europe has already passed various laws
to this effect, including the restriction of Hazardous Substances (RoHS) directive and the WEEE (Waste Electrical and
Electronic Equipment) directive. The RoHS directive restricts the amount of certain substances in electrical and
electronic equipments. The WEEE directive sets collection, recycling, and recovery targets for electrical goods and is
part of a legislative initiative to solve the problem of huge amounts of toxic e-waste. TCS needs to work on developing
solutions for solving the issue of waste management. One of the routes could be to work with the company's
Research & Development team and the consumers to design products that are more resource effec tive and simpler to
recycle and dispose.

Performance Metrics : TCS also recognizes the need for the best of breed software and performance metrics for
measuring the carbon footprint and reporting the results accurately. The following diagram elaborates the various
layers of the Carbon Monitoring Tool conceptualized and developed at TCS.
 Green Logistics

This tool would provide insights to the following four major stakeholders in a CPG company:
Distribution Managers
Planning Managers
Procurement Managers
Warehouse Managers

The following figure depicts the Carbon Management strategy.

 Green Logistics

Environmental Benefits of Green Supply Chain Best Practices

Adopting Green Supply Chain best practices results in multiple environmental benefits. These benefits are visible
across retail chains, Consumer Goods manufacturers, Consumer Goods logistics and Transportation Service
providers. These benefits include improvements in energy and waste reduction, less packaging in related activities,
and decreased GHG emissions. Consumer Goods manufacturers can decrease GHG emissions and waste by
investing in LEED (Leadership in Energy & Environmental Design) certified green buildings and retrofitting their
distribution centers to be more environments friendly.

The above mentioned processes will enable the Consumer Goods manufacturers to access carbon credits.
Unused credits could be sold to other organizations worldwide.
 Green Logistics

Business benefits of Green Supply Chain Best Practices

Those Consumer Goods manufacturers which can achieve positive environmental improvements by reducing
energy consumption and decreasing packaging in distribution activities can be termed as BiC (Best-in-Class) firms.
Best-in-Class Consumer Goods manufac turers gain business benefits through better distribution efficiency and
improved compliance processes. Also, BiC manufacturers experience 1-19 % improvement in product differentiation,
distribution expenses and risk mitigation strategies. Alongside, over 80 % of BiC CPG logistics and transportation
service providers have improved significantly in terms of improved distribution efficiency, reduced distribution cost,
and increased service differentiation. They have also witnessed a 20-50% improvement in customer retention and
compliance processes.
 Green Logistics

Challenges
Implementing Green Logistics has never been easy. Some of the challenges that Consumer Goods Organizations
could face are as follows:

Lack of information about the green supply chain best practices : The organizations might be left with a limited
view because of lack of information on decree and green supply chain best practices. As previously construed
investments costs do not play a big role.

Lack of tools to optimize the supply chain with environmental management : Though there are plenty of tools
available for supporting Green Supply chain initiatives, the challenge lies in selecting the right tool for a particular
initiative.

Advent of global sourcing making tracing of carbon footprint difficult : Since the advent of global sourcing,
tracking the carbon footprint of finished products have become difficult. However, the practice of requesting
carbon footprints from suppliers is slowly progressing. One of the examples is the carbon disclosure project that is
being piloted by 11 multinationals including Dell, L'Oreal and Unilever. The project asks participating
organizations to request carbon footprint information from suppliers and promote emission reduction measures
across the supply chain.

References
McKinnon Alan, Cullinane Sharon, Browne Michael, Whiteing Anthony (2009), Green Logistics: Improving the
environmental sustainability of logistics, Kogan Page
http://www.ic.gc.ca/ n
http://www.weforum.org/en/index.htm n
www.tcs.com n