Linköping Studies in Science and Technology Dissertations, No Christofer Kohn - PDF

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Linköping Studies in Science and Technology Dissertations, No.1220 Towards CO 2 efficient centralised distribution Christofer Kohn 2008 Department of Management and Engineering Linköpings universitet,

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Linköping Studies in Science and Technology Dissertations, No.1220 Towards CO 2 efficient centralised distribution Christofer Kohn 2008 Department of Management and Engineering Linköpings universitet, SE Linköping, Sweden Christofer Kohn, 2008 (unless otherwise noted) Towards CO 2 efficient centralised distribution Linköping Studies in Science and Technology, Dissertations, No International Graduate School of Management and Engineering, IMIE Dissertation No. 120 ISBN: ISSN: ISSN: Printed by: LiU-Tryck, Linköping Distributed by: Linköping University Department of Management and Engineering SE Linköping, Sweden Tel: ACKNOWLEDGEMENTS One of the more common questions that you are faced with during the process of writing a doctoral dissertation is When will you be finished?. At times, this has been an almost agonising question to answer, as the light at the end of the tunnel has felt so far away. The manuscript that you now hold in your hands is the artefact that symbolises that the process has come to an end. In the following paragraphs, I would like to extend my fullest gratitude to all the people, who in one way or another, have contributed to making this such a memorable and worthwhile process to go through. My supervisors, Associate professor Maria Huge Brodin and Professor Mats Abrahamsson, have both given me excellent support and advice throughout the process. Maria has not only been a supervisor, but also a dedicated co-writer over the years. In the process of finalising this dissertation, Assistant professors Jakob Rehme from Linköping University and Gyöngyi Kovács from the Swedish School of Economics and Business Administration in Helsinki have provided me with useful comments and suggestions on how to improve the manuscript. Thank you for your time and effort. During my years in Linköping, I have come to make many rewarding acquaintances who have aided me in the process in varying ways. In particular, I would like to thank all of my colleagues at Logistics Management and the Department of Management and Engineering, many of whom have also become friends that I treasure and hold dear. Much appreciated financial support for this research has been provided by Vinnova, the Swedish governmental agency for innovation system. I would also like to extend my gratitude to all respondents that have provided me with interesting and insightful empirical input for my research. My family has cheered me on throughout my ordeals these years and I would have not managed without your support thank you! Oliver, you gave me a new perspective on life at a time when I needed it the most and even though you do not understand this today, I will remind you of it in the days to come. Last but not least I would like to thank Linda, who with her love, spirit, and wit has supported me in accomplishing my goal I love you with all my heart! Sigtuna, October 2008 Christofer Kohn i ii ABSTRACT This dissertation treats a topic that has received increasing attention as of late, namely that of the environment and in particular increasing levels of CO 2 emissions caused by transport. The aim of the dissertation is to explain how a shipper, through various measures, can reduce transportrelated CO 2 emissions when centralising a distribution system and how this affects the provision of cost efficient customer service. Earlier research has stated that this type of structural change is considered unfavourable from an environmental viewpoint as it increases the amount of transport work generated by the system and thereby transport-related CO 2 emissions. The argument that is made in this dissertation, however, is that transport work is only one aspect to consider when evaluating how transport-related CO 2 emissions are affected by this type of structural change. The reason for this being that a change in structure and management of the same can enable a shipper to make other changes within the distribution system that can prove beneficial from an environmental perspective as they decrease the amount of CO 2 emissions per tonne kilometre. Theoretically, the dissertation has its foundation in two different areas in logistics research. The first area concerns logistics and the environment, where the frame of reference examines measures discussed in previous research with reference to how a shipper can reduce CO 2 emissions related to transport. The second area treated in the frame of reference concerns how costs and service are affected by the structural change of centralising a distribution system and how this relates to the measures discussed in the first part of the framework. From a methodological viewpoint, the dissertation is based on case studies. These are presented in four appended manuscripts (a licentiate thesis and three papers), where the results of these studies are used as empirical input for the synthesising analysis that is led in the dissertation. A key deliverable from the research presented in this dissertation is the classification presented below (see Table 1), which differentiates between measures that increase transport-related CO 2 emissions and measures that decrease transport-related CO 2 emissions when a distribution system is centralised. By presenting this classification, the dissertation extends previous research on the environmental impact of various logistics strategies, where centralised distribution is an example of such a strategy. iii Table 1: Classification of measures that increase and decrease transport-related CO 2 emissions when a distribution system is centralised Measures that increase Measures that decrease transport-related CO 2 emissions transport-related CO 2 emissions - Reducing the number of warehouses - Employing a slower mode of transport - Employing a faster mode of transport for regular deliveries for regular deliveries - Employing intermodal rail-truck transport for the consolidated flow - Improving the fill-rate for laden trips in the consolidated flow (unimodal truck transport) - Reducing the number of emergency deliveries - Imposing stricter environmental demands on transport providers With regards to this classification, it is concluded that a shipper that seeks to centralise its distribution system in a more CO 2 efficient manner will aim to identify a structural configuration that minimises the increase in transport work. This is imperative as there is a close link between transport work and CO 2 emissions. Hence, a CO 2 efficient centralised distribution system will include more central warehouses than that advocated by earlier research on centralised distribution. This in turn implies that a shipper may not reach the full potential in economies of scale as advocated in earlier research. However, such a configuration will simultaneously lead to less transport work, whereby a shipper will be able to offset the increase in transport work by employing measures that decrease the amount of transport-related CO 2 emissions per amount of transport work (see Table 1). The results also indicate that in addition to reducing transportrelated CO 2 emissions, some of these measures come with a cost incentive. By employing such measures, a shipper can come to compensate for the potential loss in economies of scale caused by employing a structural configuration that seeks to minimise the increase in transport work rather than to maximise economies of scale. By this means, the dissertation contributes to research on centralised distribution by considering how a reduction in transport-related CO 2 emissions is interrelated with the provision of cost efficient customer service. iv SAMMANFATTNING Denna avhandling berör ett område som har fått ökad uppmärksamhet på senare tid, nämligen det av vår miljö och transportrelaterade CO 2 -emissioner. Avhandlingen syftar att förklara hur ett varuägande företag kan minska transportrelaterade CO 2 -emissioner vid en centralisering av sitt distributionssystem samt hur detta inverkar på företagets tillhandahållande av kostnadseffektiv kundservice. Tidigare forskning har menat att denna typ av strukturell förändring är negativ för miljön då den leder till en ökning av mängden transportarbete i systemet och därmed även en ökning av transportrelaterade CO 2 -emissioner. Denna avhandling argumenterar istället att transportarbete enbart är en viktig aspekt att ta i beaktande vid en utvärdering av hur denna typ av strukturell förändring påverkar ett varuägande företags transportrelaterade CO 2 -emissioner. Logiken bakom detta är att en strukturförändring i sig kan ge ett företag nya möjligheter att genomföra andra och nya förändringar inom distributionssystemet, vilka kan visa sig fördelaktiga ur ett miljöperspektiv då de minskar mängden CO 2 -emissioner per tonkilometer. Teoretiskt sett tar denna avhandling sin utgångspunkt i två olika områden i tidigare logistikforskning. The första området rör miljölogistikforskning, där den teoretiska referensramen redogör för olika åtgärder ett varuägande företag kan vidta för att minska transportrelaterade CO 2 -emissioner. Det andra området i referensramen avhandlar hur en centralisering av ett distributionssystem påverkar kostnader och service i systemet samt hur detta anknyter till de åtgärder som diskuterades i den första delen av referensramen. Metodologiskt sett är avhandlingen baserad på fallstudier som presenteras i fyra bifogade manuskript (en licentiatavhandling samt tre artiklar), där resultaten från dessa studier används som empirisk grund för den övergripande analysen som förs i avhandlingens kappa. Ett viktigt resultat från forskningen som presenteras i denna avhandling är den klassificering som presenteras nedan (se Tabell 1). Denna klassificering differentierar mellan åtgärder som ökar respektive minskar transportrelaterade CO 2 -emissioner när ett distributionssystem centraliseras. Genom att presentera denna klassifikation så bidrar denna avhandling till tidigare forskning kring miljömässiga konsekvenser av olika logistikstrategier, där centralisering av distributionssystem är ett exempel på en sådan strategi. v Tabell 1: Klassificering av åtgärder som ökar respektive minskar transportrelaterade CO 2- emissioner när ett distributionssystem centraliseras Åtgärder som ökar transportrelaterade CO 2 -emissioner - Minskning av antalet lager - Användning av snabbare transportmedel för vanliga transporter Åtgärder som minskar transportrelaterade CO 2 -emissioner - Användning av långsammare transportmedel för vanliga transporter - Användning av intermodala transporter (jänväg-lastbil) för det konsoliderade flödet - Förbättring av fyllnadsgraden för transporter i det konsoliderade flödet (vägtransporter) - Minskning av brandkårsutryckningar - Ökning av miljökrav på transportleverantörer Med avseende på denna klassificering så dras slutsatsen att en varuägare som önskar centralisera sitt distributionssystem på ett mer CO 2 -effektivt sätt måste försöka identifiera en strukturell konfiguration som minimerar ökningen i transportarbete. Detta är av stor betydelse då det finns ett starkt samband mellan transportarbete och CO 2 -emissioner. Med andra ord kommer ett distributionssystem som är centraliserat på ett CO 2 -effektivt sätt att innehålla fler centrallager än vad som har förespråkats i tidigare forskning kring centralisering. Detta innebär i sin tur att en varuägare kanske inte uppnår den fulla besparingspotentialen som brukar förespråkas. Å andra sidan kommer en sådan konfiguration samtidigt att leda till en mindre ökning i transportarbete, varigenom en varuägare ges en större möjlighet att kompensera denna ökning genom att vidta åtgärder som minskar transportrelaterade CO 2 -emissioner per mängd transportarbete (se Tabell 1). Utöver detta indikerar resultaten även att en del av dessa åtgärder kan föra med sig kostnadsbesparingar utöver att reducera transportrelaterade CO 2 -emissioner. Genom att vidta sådana åtgärder kan en varuägare därmed kompensera för det potentiella bortfallet i skalfördelar som är effekten av att använda sig av en strukturell konfiguration som ämnar minimera ökningen i transportarbete snarare än att maximera stordriftsfördelar. Genom att analysera hur transportrelaterade CO 2 -emissioner är kopplade till kostnadseffektiv kundservice så bidrar denna avhandling även till forskning kring centraliserade distributionssystem. vi TABLE OF CONTENTS 1 INTRODUCTION BACKGROUND IDENTIFYING A RESEARCH PROBLEM PURPOSE AND RESEARCH QUESTIONS SCOPE OF THE RESEARCH AND IMPORTANT DELIMITATIONS Type of structural change studied Applying a shipper perspective CO 2 emissions as an indicator of environmental performance COMPOSITION OF THE DISSERTATION METHODOLOGY APPLYING A CASE STUDY APPROACH RESEARCH DESIGN Theoretical foundations Selection of cases and data collection Analysis QUALITY OF THE RESEARCH FRAME OF REFERENCE A POINT OF DEPARTURE CHANGES IN LOGISTICS SYSTEMS A SHIPPER PERSPECTIVE ON MEASURES TO REDUCE TRANSPORT-RELATED CO 2 EMISSIONS Transport intensity Modal split Vehicle utilisation Fuel and energy source efficiency Model of analysis with regards to analysing the effect of measures for reducing CO 2 emissions per tonne kilometre EXAMINING POTENTIAL INTERRELATIONSHIPS BETWEEN A REDUCTION IN TRANSPORT-RELATED CO 2 EMISSIONS AND THE PROVISION OF COST EFFICIENT CUSTOMER SERVICE IN A SHIPPER S DISTRIBUTION SYSTEM Warehousing costs Inventory costs Transportation costs Cost of lost sales The importance of economies of scale in centralised distribution systems Model of analysis with regards to interrelationships between a reduction in CO 2 emissions per tonne kilometre and cost efficient customer service vii 4 SUMMARY OF APPENDED MANUSCRIPTS LICENTIATE THESIS CENTRALISATION OF DISTRIBUTION SYSTEMS AND ITS ENVIRONMENTAL EFFECTS PAPER A CENTRALISED DISTRIBUTION SYSTEMS AND THE ENVIRONMENT: HOW INCREASED TRANSPORT WORK CAN DECREASE THE ENVIRONMENTAL IMPACT OF LOGISTICS PAPER B A SHIPPER PERSPECTIVE ON INTERMODAL TRANSPORT: EXPLORING THE ROLE OF RAIL-TRUCK INTERMODAL TRANSPORT IN THREE SHIPPERS LOGISTICS SYSTEMS PAPER C EXPLORING SUPPLY CHAIN CAPTAINCY: WHY POWER MATTERS IN SUPPLY CHAIN COLLABORATION THE CASE OF VOLVO PARTS ANALYSIS OF RESULTS ANALYSIS OF MEASURES FOR A SHIPPER TO REDUCE TRANSPORT-RELATED CO 2 EMISSIONS WHEN CENTRALISING A DISTRIBUTION SYSTEM Modal split Vehicle utilisation Fuel and energy efficiency ANALYSIS OF INTERRELATIONSHIPS BETWEEN A REDUCTION IN TRANSPORT-RELATED CO 2 EMISSIONS AND THE PROVISION OF COST EFFICIENT CUSTOMER SERVICE Modal split Vehicle utilisation Fuel and energy efficiency A DISCUSSION ON THE CONFIGURATION OF A CENTRALISED DISTRIBUTION SYSTEM AND ITS CONNECTION TO TRANSPORT WORK CONCLUSIONS, CONTRIBUTIONS, AND FUTURE RESEARCH CONCLUSIONS Striving towards a more CO 2 efficient form of centralisation THEORETICAL CONTRIBUTION MANAGERIAL IMPLICATIONS SUGGESTIONS FOR FUTURE RESEARCH LIST OF REFERENCES viii APPENDIX I: LICENTIATE THESIS (KOHN, 2005) CENTRALISATION OF DISTRIBUTION SYSTEMS AND ITS ENVIRONMENTAL EFFECTS APPENDIX II: APPENDIX III: APPENDIX IV: PAPER A (KOHN AND HUGE BRODIN, 2008) CENTRALISED DISTRIBUTION SYSTEMS AND THE ENVIRONMENT: HOW INCREASED TRANSPORT WORK CAN DECREASE THE ENVIRONMENTAL IMPACT OF LOGISTICS PAPER B (KOHN, 2008) A SHIPPER PERSPECTIVE ON INTERMODAL TRANSPORT: EXPLORING THE ROLE OF RAIL-ROAD INTERMODAL TRANSPORT IN THREE SHIPPERS LOGISTICS SYSTEMS PAPER C (KOHN AND SANDBERG, 2006) EXPLORING SUPPLY CHAIN CAPTAINCY: WHY POWER MATTERS IN SUPPLY CHAIN COLLABORATION THE CASE OF VOLVO PARTS ix x LIST OF FIGURES FIGURE 1-1: GENERIC ILLUSTRATION OF A DECENTRALISED AND A CENTRALISED DISTRIBUTION SYSTEM... 8 FIGURE 1-2: A THREE-TIERED MODEL OF LOGISTICS FIGURE 2-1: PROBLEM FORMULATION IN THE LICENTIATE THESIS - WHAT ARE THE ENVIRONMENTAL CONSEQUENCES OF CENTRALISATION? FIGURE 2-2: THE DISSERTATION S ANALYSIS PROCESS FIGURE 3-1: GENERIC ILLUSTRATION OF THE HIERARCHICAL NATURE OF LOGISTICS CHANGES 35 FIGURE 3-2: ILLUSTRATION OF THE CONSOLIDATED FLOW THAT IS CREATED IN A CENTRALISED DISTRIBUTION SYSTEM FIGURE 3-3: AMOUNT OF CO 2 EMISSIONS PER TONNE KILOMETRE AS A FUNCTION OF FILL-RATE FIGURE 3-4: REDUCTION IN FUEL CONSUMPTION (%) RELATING TO VARIOUS MEASURES FIGURE 3-5: FOCUS IN THE FIRST PART OF THE ANALYSIS FIGURE 3-6: NUMBER OF WAREHOUSES AND TRANSPORTATION COSTS FIGURE 3-7: CUSTOMER SERVICE AS A FUNCTION OF AMOUNT OF INVENTORY FIGURE 3-8: NUMBER OF WAREHOUSES AND COST OF LOST SALES FIGURE 3-9: COMPARISON OF TOTAL COST OF DISTRIBUTION DEPENDING ON NUMBER OF WAREHOUSES FIGURE 3-10: FOCUS OF THE SECOND PART OF THE ANALYSIS FIGURE 5-1: EXAMPLE OF A SHIPPER S POTENTIAL TO AFFECT CO 2 EMISSIONS FOR THE WHOLE OF A DISTRIBUTION SYSTEM IS LINKED TO THE CONSOLIDATED FLOW AND RAIL-TRUCK INTERMODAL TRANSPORT IN A CENTRALISED DISTRIBUTION SYSTEM (BASED ON A 40% INCREASE IN TRANSPORT WORK DUE TO THE STRUCTURAL CHANGE) FIGURE 5-2: BREAK-EVEN POINTS (% OF EMERGENCY TRANSPORT WORK TO TOTAL TRANSPORT WORK) FOR WHEN CENTRALISATION CAN PROVE BENEFICIAL FROM AN ENVIRONMENTAL PERSPECTIVE PERTAINING EXCLUSIVELY TO EMERGENCY DELIVERIES FIGURE 5-3: EXAMPLE OF HOW CO 2 EMISSIONS IN A DISTRIBUTION SYSTEM ARE AFFECTED BY A REDUCTION IN EMERGENCY DELIVERIES DEPENDING ON THE EXTENT OF EMERGENCY DELIVERIES BEFORE CENTRALISATION (BASED ON A 50% INCREASE IN TRANSPORT WORK DUE TO THE STRUCTURAL CHANGE) FIGURE 5-4: EXAMPLE OF HOW FILL-RATE IMPROVEMENTS FOR THE CONSOLIDATED FLOW IN A CENTRALISED DISTRIBUTION SYSTEM CAN HAVE A LARGE EFFECT FOR THE SYSTEM AS A WHOLE (BASED ON A 40% INCREASE IN TRANSPORT WORK DUE TO THE STRUCTURAL CHANGE) xi FIGURE 5-5: EXAMPLE OF HOW TRANSPORTATION COSTS AND TOTAL DISTRIBUTION COSTS FOR THE SYSTEM AS A WHOLE ARE AFFECTED WHEN TRANSPORT WORK FOR THE CONSOLIDATED FLOW IS TRANSFERRED FROM UNIMODAL TRUCK TRANSPORT TO INTERMODAL RAIL-TRUCK TRANSPORT IN A CENTRALISED DISTRIBUTION SYSTEM (BASED ON A 40% INCREASE IN TRANSPORT WORK DUE TO THE STRUCTURAL CHANGE) FIGURE 5-6: EXAMPLE OF HOW INVENTORY COSTS AND TOTAL DISTRIBUTION COSTS INCREASE FOR THE SYSTEM AS A WHOLE OWING TO AN INCREASE IN SAFETY STOCK LEVELS IN ORDER TO WARRANT AN UNCHANGED LEVEL OF STOCK AVAILABILITY WHEN TRANSPORT WORK FOR THE CONSOLIDATED FLOW IS TRANSFERRED FROM UNIMODAL TRUCK TRANSPORT TO INTERMODAL RAIL-TRUCK TRANSPORT IN A CENTRALISED DISTRIBUTION SYSTEM FIGURE 5-7: ILLUSTRATION OF HOW TRANSPORT-RELATED CO 2 EMISSIONS ARE CONNECTED TO THE PROVISION OF COST EFFICIENT CUSTOMER SERVICE IN A SHIPPER S CENTRALISED DISTRIBUTION SYSTEM WITH REFERENCE TO EMERGENCY DELIVERIES FIGURE 5-8: ILLUSTRATION OF HOW MUCH AN IMPROVEMENT IN FILL-RATE FROM 70% TO 80% CAN AFFECT TRANSPORTATION COSTS AND TOTAL DISTRIBUTION COSTS DEPENDING ON THE MAGNITUDE OF THE CONSOLIDATED FLOW FIGURE 5-9: AMOUNT OF TONNE KILOMETRES GENERATED BY THE TWO DISTRIBUTION SYSTEMS WITH REFERENCE TO THE EIGHT ANALYSED MARKETS FIGURE 5-10: ILLUSTRATION OF HOW THE AVERAGE LENGTH OF HAUL HAS INCREASED FOR THE GERMAN AND BRITISH MARKETS DUE TO THE STRUCTURAL CHANGE (BASED ON KOHN, 2005, P 83) FIGURE 5-11: COMPARISON OF TODAY S DISTRIBUTION SYSTEM AND A CONCEPTUAL DISTRIBUTION SYSTEM WHERE THE GERMAN AND THE BRITISH MARKETS ARE SUPPLIED BY THE CENTRAL WAREHOUSE IN LINDÅS, SWEDEN FIGURE 6-1: GENERIC ILLUSTRATION OF A DECENTRALISED AND A CENTRALISED DISTRIBUTION SYSTEM, AS APPLIED IN THIS DISSERTATION FIGURE 6-2: ILLUSTRATION OF THE CONSOLIDATED FLOW THAT IS CREATED WHEN A DISTRIBUTION SYSTEM IS CENTRALISED FIGURE 6-3: ILLUSTRATION OF HOW TRANSPORT WORK AND CO 2 EMISSIONS ARE AFFECTED IN DIFFERENT WAYS WITH REGARDS TO THE STUDIED MEASURES WHEN A DISTRIBUTION SYSTEM IS CENTRALISED xii TABLE 2-1: DESCRIPTION OF WHICH CASE STUDIES ARE USED IN WHICH APPENDED LIST OF TABLES MANUSCRIPT TABLE 2-2: SUMMARY OF DATA COLLECTION TABLE 2-3: FOUR TESTS TO ENSURE THE QUALITY OF THE RESEARCH TA
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