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Case Study – Minerva Gardening Equipment

Green logistics, as the integration of environmental thinking into all the processes of logistics and transportation of cargo through the distribution networks, is becoming increasingly important in the strategy planning of logistics companies.  In the most developed countries, road is the dominant transport mode and therefore it shapes a significant part of the overall environmental impact of logistics.

Increasing the filling rate of trucks is a very effective sustainability improvement, as it can create both environmental and economic benefits for the performance of the companies.  The environmental results of improving the utilization of vehicles i.e. by sending consolidated shipments to multiple destinations rather than single shipments to each of them, include reducing emissions, traffic level and noise pollution.

Consolidating shipments can lead to reducing the total number of running kilometres by trucks and also the amount of CO2 emissions.  Shared deliveries can provide advantages for the transport providers and also for the companies whose freight is consolidated; i.e. the transport provider can offer them a relatively lower price for the consolidated transportation because by doing this they can save full truckloads.  It means that they can allocate the saved truck to another trip, and make more profit.

Company

The company, Minerva Gardening Equipment (MGE) is a supplier of gardening equipment, with its central distribution centre in Cologne, Germany.  Their customers are retailers of building and gardening products located in different European countries including Austria, Czechia, Italy and Poland.

Strategic decisions made by the managing board of the company have emphasized making the operations of the company more efficient and also more eco-friendly by reducing the amount of emissions through their distribution network.  The managing board believes that such an improvement will not only lead to savings on the cost of transportation, but it will also improve their reputation in the market as a socially responsible company.  the company has identified logistics as the department that has potential for a high level of contribution to the new strategy.  An obvious action to be taken by the logistics department for contributing to the strategy is improving the filling rate of the trucks, i.e. reducing the empty space on the trucks transporting the products of the company from their central distribution centre in Cologne to their customers in European countries.  The management group believes that even if the logistics department is currently performing well, there is still potential for improvements.  Such improvement would be very important, as they have the potential to advance both the environmental and financial performance of the company.

Discussion

You are the manager of the logistics department of MGE, responsible for arranging all the logistics operations of the company.  Table 1 shows the data for shipments from 3-10th January which is typical of deliveries all the year round.  The deliveries are all outwards from the central distribution centre in Cologne to the different cities in Europe.  The last column indicates the category of the freight: express shipments, consolidated cargo (when the cargo of the company is consolidated with the cargo from another company being shipped to an area near the destination), full truckloads (FTL) and less-than-truckloads (LTL) cargo.

Freight forwarders are contacted to arrange the shipments of the FTL and LTL cargo, and therefore the logistics department of MGE has the responsibility for administrating these shipments, saving the logistics costs for the company.  The express deliveries, including small items to be delivered very fast, are sent by the post company.  Planning and operating the consolidated deliveries is outsourced to third party logistics service provider, as they can arrange the consolidation of shipments because they have many other customers to consolidate their cargo to CGE’s freight.

When making any decision, you should always bear in mind your main commitment as the manager of the logistics department to the customers of the company, i.e. delivering the products on time and in the right amount and quality.  In order to keep the level of service standard, your alternative suggested improvements are not allowed to result in a delivery time of more than 5 days later than what is stated in the table.

‘Euro pallets’ are typically used for shipments (1.2m long, x 0.8m wide).  The height is dependent on the cargo.  Note that for this type of cargo, the pallets are non-stackable, i.e. they cannot be placed on top of each other in order to prevent potential damage to the packages.

Questions

Calculate the average percentage of the volume-wise filling rate of your trucks, considering that the type of trucks used for the FTL, LTL and consolidated transport is the mega trailer with dimensions of 13.6m (L) x 2.45m (W) x3m (H) and a capacity of 90m3 of cargo volume.
What types of solutions do you suggest for improving the filling rate of the trucks?
Assuming that for every kilometre of transportation, the amount of CO2 emissions for the empty mega trailer truck is 0.77kg/km and for the full truck is 1.10 kg/km, how much are your CO2 emissions savings by implementing your suggested improvement measures? You can assume a linear relation between the filling rate of the truck and the amount of emission generate by it in terms of kilograms.
How much will the company save in terms of transportation cost by implementing your suggested improvement measures for the shipments in the given time? See Table 2 for pricing details and Appendix 1 for a guide to pricing.
Critically discuss and evaluate current elephants and future logistics and transport issues, in the context of the globalisation of the economy.

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