Sustainable Logistics Management
Instructions:
The task deals with the application of an aspect of the theory and concepts of sustainable logistics
management in the context of a company or commercial sector of your choice. Thus your task is to
critically examine the relevance and utility of a sustainable logistics management topic to a
contemporary business sector of your choice.
x Try to use actual company data to support any arguments that might be presented. This may
take a number of forms, e.g. schematics of supply chain structures, tables of transportation
costs, policy documents, Pareto analysis of inventory, etc. Purely descriptive material must
be kept to a minimum and all analysis must be evaluated against the theory.
x The exposition should draw on contemporary publications and journal articles on reverse
logistics and warehousing to build the argument and not simply represent the material on the
course or covered in the recommended text. It is expected that the theoretical support in
these reports will provide substantially more than an overview of the chosen topic.
Delivery and Submission:
1x Essay
3000 words
SAMPLE ANSWER
SUSTAINABLE LOGISTICS MANAGEMENT: THE WALMART CORPORATION
Table of Contents
Issues associated with sustainable logistics and the transport of goods and services. 4
1.2 Difference between Inbound and Outbound sustainable logistics. 4
1.3 Difference between Third Party Logistics (3PL) and Fourth Party Logistics. 6
2.1 Reverse (return) logistics and its application to various industries. 7
2.2 Issues and challenges in the implementation of application of reverse logistics. 8
2.3 Impacts of implementing reverse logistics schemes in different business sectors. 8
3.1 Different measures of reducing the amount of greenhouse gas and waste generated by businesses. 9
3.2 Extent to which businesses can apply the concepts of reusing, reducing and recycling. 11
List of figures
Figure 1: Walmart’s inbound logistics and outbound logistics
Figure 2: Figure 2: The 3PL concept in Walmart
SUSTAINABLE LOGISTICS MANAGEMENT: THE WALMART CORPORATION
Introduction
Ensuring that goods and services reach consumers in the right form, quantity and time is very important in business organizations. To achieve this, companies must put in place measures to ensure that all raw materials are obtained in the right time, and that distribution of finished products takes place as it should. This makes logistics an essential component of supply chains. Using the Walmart Company as a case study, this paper explores the topic of sustainability as it applies in logistics. Specific focus is given to reverse logistics, a concept that is increasingly gaining popularity in today’s business organizations.
Issues associated with sustainable logistics and the transport of goods and services
Logistics is an important aspect of the supply chain in every organization. With effective logistics management processes, companies can enjoy substantial cost savings (Rajagopal, Sundram & Naidu, 2015 p.39). The Council of Logistics Management defines logistics as “the process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements”. This definition insinuates that with proper logistics, chances of business success are high since costs are kept in control and customers are satisfied.
Nevertheless, transport of goods and services poses a significant challenge to business organizations. Transport has been identified as the second largest emitter of harmful gases worldwide (Survana, 2018 para.5). Apart from this, business organizations must ensure that the transportation of goods and services is done within reasonable costs so that organizations may make profits. This, therefore, underscores the issues associated with sustainable logistics and the transport of goods and services.
1.2 Difference between Inbound and Outbound sustainable logistics
Different organizations use different designs for their supply chain activities depending on the organization’s structure and management’s understanding of supply chain (Lai & Cheng, 2016 p.38). However, logistics activities in most companies take two forms: outbound logistics and inbound logistics. Generally, inbound logistics concerns itself with materials management-moving raw materials and spare parts into a company, while outbound logistics is about physical distribution-processing, moving and storing finished as well as semi-finished products.
Walmart’s inbound logistics are as follows: products from suppliers together with distributors are moved to the various distribution centers via the company’s huge system of fleet trucks. In case the products are of a perishable nature, the company engages the different suppliers to apply their inventory systems in managing products (Bensoussan & Fleisher, 2013 p.242). Regarding outbound logistics, Walmart uses the technique of cross docking, in which “finished goods are taken straight from the supplier’s site, sorted, and delivered directly to the store” (Bensoussan & Fleisher, 2013 p.242). An advantage of cross docking is that there are fewer damages to products; less staff members are also utilized.
The difference between inbound logistics and outbound logistics in Walmart is captured in the figure below:
Figure 1: Walmart’s inbound logistics and outbound logistics
Source: Bensoussan & Fleisher (2013)
1.3 Difference between Third Party Logistics (3PL) and Fourth Party Logistics
Organizations face dynamic challenges as they transact their business. When it comes to supply chain management, companies can find relief in the availability of logistic service providers whose role is to ensure that companies maintain their value within a market environment that is highly competitive and turbulent. In the words of Gautam et al. (2019, p.405), logistic service providers make logistics management easy for companies so that companies can direct their efforts on production and quality improvement as the logistic service providers handle the logistics function.
The common types of logistic service providers are third-party logistics and fourth-party logistics, abbreviated 3PL and 4PL respectively. The difference between the two is that 3PL is primarily concerned with storing together with shipping, whereas 4PL companies handle the entire supply chain (Gautam et al., 2019 p.406). More specifically, 3PL firms work in collaboration with shippers to ensure that logistics as well as distribution operations occur smoothly. On the other hand, 4PL companies manage all supply chain processes by ensuring that adequate and appropriate capabilities, technologies and resources are available and utilized appropriately (Srivastava, 2020 p.59). This is to say that 3PL is narrow in scope, while 4PL is broader in scope.
In Walmart, the 3PL concept is more popular. Operating one among the world’s biggest distribution networks, Walmart runs hundreds of storage facilities (Zentes, Morschett & Schramm-Klein, 2017 p.412). These are categorized into seven types, one of them being the import/redistribution centers. Walmart’s redistribution centers are massive facilities that receive merchandise from various parts of the world. This merchandise is then redistributed to the different regional distribution centers. It is important to note that most of Walmart’s distribution centers are operated 3PL companies (Zentes et al., 2013 p.413). An illustration of Walmart’s distribution centers is shown below:
Figure 2: The 3PL concept in Walmart
Source: https://www.mwpvl.com/html/walmart.html
2.1 Reverse (return) logistics and its application to various industries
Reverse logistics is one of the key principles of supply chain management. It is defined as “a group of strategies to aid in the movement of goods and services in the opposite direction, that is from the customer to the manufacturer” (Akkucuk, 2019 p.53). In simpler terms, reverse logistics comprises activities such as collecting beneficial waste and returning it to manufacturers, purchase of reusable packaging, re-sale of components that are not extremely worn-out, and the reselling of refurbished consumer goods (Stănciulescu, 2010 p.358). It is said to occur when goods and services are returned, recycled, exchanged, or repaired. In Walmart, the reverse logistics concept is reflected in the company’s return policy, which states that “all merchandise purchased from Walmart.com may be returned either to a store or by mail within 90 days of receiving it, unless otherwise noted” (Crandall, Crandall & Chen, 2014 p.54). In addition, the company has simplified the process of making returns online: customers only need to log in to their accounts and report any item that they want to return.
2.2 Issues and challenges in the implementation of application of reverse logistics
Reverse logistics plays an important role in improving customers’ experience and making them satisfied. Nonetheless, its implementation usually comes with a fair share of issues and challenges. In general, the implementation of reverse logistics is thought to involve significant costs, liabilities, risks and uncertainties. Other challenges in the application of the concept of reverse logistics include operational complications as well as ignorance about the potential benefits of this practice to organizations (Chileshe et al., 2015 p.181). For Walmart, several challenges have been faced as the company adopts or rather implements the concept of reverse logistics. According to Kapadia (2018, para.7), Walmart’s supply chain has been subjected to excess pressure especially during the peak season. As free return policy causes squeezing of trucking capacity especially during holiday seasons. There is also the issue of costs: in some instances, reshipping an item and restocking it costs double the amount the item would have been sold (Kapadia, 2018 para.8).
2.3 Impacts of implementing reverse logistics schemes in different business sectors
Based on the above discussion, it may be concluded that reverse logistics generates a number of positive impacts on organizations. The aspect of enhanced customer satisfaction has already been identified. Other impacts of implementing reverse logistics in business organizations include improved financial performance and a positive contribution towards safeguarding the environment. Concerning the impact of reverse logistics on financial performance, many companies in different business sectors have reaped substantial financial gains. Companies such as Walmart, Sainsbury, Target, and Calgary are identified as just a few of the firms that have recorded notable cost savings as a result of implementing reverse logistics. For Sainsbury, reverse logistics schemes have yielded savings worth $17,000, while for Calgary, $57,000 worth of savings has been made following implementation of reverse logistics (Information Resources Management Association, 2019 p.1500).
In the automobile sector, implementation of reverse logistics schemes has had identifiable impacts. Operational efficiency in automobile companies has been enhanced and production costs reduced significantly. Reverse logistics schemes have also helped automobile firms to make significant improvements to product design while at the same time strengthening the internal management (Mao & Jin, 2014 p.32). The social impacts of such schemes are also worth mentioning; reverse logistics facilitates better utilization of resources, which in turn contributes towards preserving and protecting the environment.
Generally, the impacts of implementing reverse logistics in business organizations largely revolve around revenue maximization and customer satisfaction. Akkucuk (2019, p.134) outlines five major ways through which reverse logistics boosts revenue in organizations. Firstly, reverse logistics schemes enable companies across different sectors to deliver and process returned products in a timely manner. As a result, such companies either earn more money or save significant sums of money from returned products. The explanation for this is returned products often serve as an untapped source of revenue. Secondly, reverse logistics safeguards a company’s profits. As long as a company handles returned products properly, it avoids hefty penalties together with fines that are usually levied by government regulatory bodies like the FDA and the Consumer Product Safety Commission. At the same time, proper implementation of reverse logistics schemes enhances customer loyalty. A fourth impact of reverse logistics schemes on business organizations is that they yield what is known as disposal benefits. Akkucuk (2019, p.134) states that there are significant benefits associated with effective reverse logistics processes. For example, companies do not have to bear the cost of holding excess inventory. Likewise, taxes together with insurance are minimized and staff levels managed.
3.1 Different measures of reducing the amount of greenhouse gas and waste generated by businesses
Walmart is very keen on promoting sustainability in its operations. Reducing waste and greenhouse gas emissions are two key areas of focus for the company. In its 2018 Global Responsibility Report, Walmart recognizes that the retail industry is one of the biggest contributors to environmental pollution through greenhouse gas emissions. It is reported that production and consumption of consumer goods worldwide accounts for at least 60% of greenhouse gas emissions, 66% of tropical deforestation, and 80% of water use (Walmart Global Responsibility Report, 2018 p.53).
To reverse this trend and foster sustainability, businesses need to take action to reduce greenhouse gas emissions and waste. Walmart, which is regarded as a leader when it comes to sustainability, works in collaboration with suppliers and other stakeholders to achieve this. The company has put in place measures like shifting to renewable sources of energy and increasing energy efficient trucks. Specifically, the company has installed more efficient lighting within its stores as well as parking lots. Regarding use of renewable energy, Walmart embarked on a plan of ensuring that at least 50% of its operations are powered through renewable energy before the year 2025 ends (Walmart Global Responsibility Report, 2018 p.56). The company also seeks to reduce greenhouse gas emissions by ensuring that its refrigeration systems are improved so that they perform more efficiently. In the company’s grocery distribution centers across Canada and the U.S., ammonia refrigeration systems have been developed. Ammonia is said to be “an efficient refrigerant that is not a greenhouse gas” (Walmart Global Responsibility Report, 2018 p.67). Similar but smaller systems are also being developed for use in the regional distribution centers, the idea being to reduce the amount of energy used for cooling purposes, and more importantly, to significantly reduce the volume of greenhouse gas emissions.
To reduce waste, Walmart has developed three strategies. These are measuring the volume of waste generated from operations, reducing the amount of waste generated from packaging as well as non-food items, and reducing food waste in its operations (Walmart Global Responsibility Report, 2018 p.73). Walmart uses diverse external and internal sources of data to create a comprehensive waste inventory that helps it to know how much waste is generated at each step of the supply chain. Once this has been determined, the company employs strategies such as recycling and reusing. More importantly, the company’s merchandising unit is keen to enhance replenishment via better planning together with forecasting. Products are also packaged in a way that extends product shelf-life (Walmart Global Responsibility Report, 2018 p.77). Walmart also seeks to reduce waste through pricing strategies: during off-peak seasons, the company reduces product prices to attract more buyers. Other strategies of reducing waste that are employed at Walmart include giving recycling and food donations (Walmart Global Responsibility Report, 2018 p.77). For inedible food, Walmart minimizes waste by converting the inedible food to compost, energy or animal feed (Walmart Global Responsibility Report, 2018 p.83).
For non-food items, Walmart employs strategies such as refurbishing, recycling, donating, and product packaging. The company is known for refurbishing shopping carts for up to four times. In recent years, the company redesigned its product advertisement strategies, especially for pharmaceutical products. The company condensed the pharmacy leaflets and revised patient information presented on the leaflets, thereby eliminating waste by eliminating the necessity of reprinting them. The result of this initiative is that Walmart saved approximately 1.3 million pounds of paper, equivalent to over 15,000 trees (Walmart Global Responsibility Report, 2018 p.79).
3.2 Extent to which businesses can apply the concepts of reusing, reducing and recycling
Sustainability is integral to success and future survival of organizations. To ensure that companies operate sustainability, three aspects are key: reducing, reusing, and recycling. Reducing focuses on ensuring that companies consume the least possible energy, thereby generating as little negative impact as possible on the environment. On the other hand, reusing seeks to minimize new materials production, which in turns reduces the volume of waste as well as energy. The rationale behind reusing is that the production of new materials is a major contributor to environmental pollution. By reusing materials, companies can extend the lifetime of these materials, which generates greater value in addition to helping preserve the environment (Mintzer, 2009 p.5). In simple terms, reusing is using an item multiple times before disposing it. Recycling is somewhat similar to reusing; the difference is that in recycling, items and materials are utilized for longer in a new or rather different form (Mintzer, 2009 p.5). In other words, recycling is converting used resources or materials into useful items (Miller & Spoolman, 2019 p.455).
The three concepts described above are very practical and can successfully be applied in business organizations. Walmart is a good illustration of the practicality of reusing, recycling, and reducing. The company is known for its circular economy, which refers to a continuous loop that characterize the manufacture, consumption and recycling of products. Pursuing the aspect of reusing, Walmart has introduced high quality but low cost alternatives in place of the single use products that existed earlier, such as straws and cutlery. Similarly, the company is now keener on recycling, with more than 150,000,000 pounds of plastics having been recycled in the year 2017 alone. With a focus on reducing harm to the environment, Walmart introduced and encouraged its suppliers to ensure that all products are properly labelled on ways of recycling.
Other than physically engaging in reducing, reusing and recycling, business can also apply these concepts by supporting or funding initiatives aimed at preserving the environment. For Walmart, there is a project known as Beyond 34, an initiative involving many stakeholders whose goal is to increase the rate of recycling in the U.S. to more than 34%. The company is also keen on reducing waste from packaging activities. Apart from the use of reusable packing containers in place of shrinkwrap and cardboard boxes, Walmart has made its plastic bags thinner, which helps to cut down on the materials used (Walmart 2017 Global Responsibility Report, 2017 p.71). In regard to reusing and extending product life, the company uses strategies such as refurbishing products such as damaged computers, game consoles, phones, TV, and tablets. These are repaired at various refurbishing centers then resold at discounted prices. Walmart also seeks to minimize waste by donating unsold goods to charity organizations (Walmart 2017 Global Responsibility Report, p.72).
3.3 Ways in which businesses can reduce the carbon footprints of operations within the global supply chain
Reducing waste and greenhouse gas emissions by Walmart are laudable actions meant to promote sustainability. There is, however, still much that needs to be done in order to reduce carbon footprints. The significance of supply chain management in improving financial performance in organizations has widely been studied. It is well known that effective supply chain processes help to improve productivity, increase efficiency, improve product development and reduce waste (The Carbon Trust, 2006 p.1). What is perhaps not as widely known is that the supply chain can also be used to reduce carbon footprints. This is in consideration of the fact that “all emission sources can be tied back to the provision of different products and services to meet the needs of the end consumer” (The Carbon Trust, 2006 p.1). In other words, the problem of carbon emissions can only be solved if businesses adopt a supply chain perspective that assesses the impact of every single supply chain activity on the environment.
Borrowing from the Walmart case study, businesses can reduce the carbon footprints of operations in several ways. To begin with, it is important to identify and implement cost-effective energy sources just like Walmart does. As recommended by The Carbon Trust (2006 p.4), new process technologies found to consume minimal energy should be embraced. On the same note, employees, consumers and other stakeholders ought to be trained on the value and use of these technologies. Secondly, since the focus is on the global supply chain, it is necessary for business organizations to collaborate with other companies and governments towards identifying opportunities, challenges and threats to the reduction of carbon footprints. Survana (2018, para.3) observes that alliances between companies and suppliers offer valuable internal support that enables organizations to keep the supply chain green.
An important point that has been highlighted regarding Walmart’s waste reduction strategies is that the company begins by measuring the volume of waste generated. This may be restated to suggest that Walmart understands the value of collecting adequate and vital information regarding waste. The same thing should be applied in the management of carbon footprints. Survana (2018, para.2) postulates that “to find out where the carbon emissions are mostly concentrated in the supply chain, and to develop necessary controls and put them in place, businesses would require quality information and assurance”. This statement highlights the need to gather information regarding the volume of carbon emissions at various stages of the supply chain.
It is also necessary to do environmental auditing and set sustainability targets. The fact that Walmart publishes global responsibility reports each year indicates why environmental auditing is crucial in reducing carbon footprints. On a more specific note, there is need for business organizations to set specific targets that suppliers must meet in reference to reducing carbon footprints. At the same time, it is worthwhile for companies to do environmental audits when engaging new suppliers just to make sure they work with suppliers who share a similar vision regarding sustainability (Survana, 2018 para.4).
Conclusion
Traditionally, goods and services should flow from the manufacturer to the consumer. While this practice remains, a somewhat new trend is being observed in companies: goods and services flowing backwards from the consumer to the manufacturer. Known as reverse logistics, this new trend is regarded as an effective strategy of promoting sustainability in organizations. It is a sure way of minimizing waste and harmful emissions. Walmart offers a good illustration of the practicality of simple concepts such as recycling, reusing and reducing as organizations strive to reduce carbon footprints.
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