Location as an Enabler for Sustainability.
John is the supply chain manager at Nishimura Fulfillment and Distribution Services. Nishimura is expanding rapidly and developing plans to open operations in six emerging markets. The company maintains its own transportation fleet, barges, rail cars, and semi-trucks. It is concerned about the environment, and thus wants to improve its sustainability results.
Since its fulfillment and distribution centers will be at the selected locations for at least 10 years, Nishimura believes that location selection is one of the most critical decisions to make. Therefore, it assigned John to develop a proposal on how to address location selection and sustainability.
John discovered that for all locations, whether domestic or worldwide, factors such as labor, land availability and cost, proximity to markets, and proximity to suppliers, taxes, and incentives were key considerations. When locating outside the home country, currency exchange and stability as well as national competitiveness were examined.
Because of Nishimura’s corporate values, senior management wanted to ensure sustainability was addressed. Logistics sustainability is defined as “the efforts of transportation companies to reduce carbon emissions, and improve supply chain efficiencies and environmental performance”. Therefore, one key to sustainability was reducing fuel consumption. Nishimura^ fulfillment and distribution centers deal in tons of cargo. Its fleet’s fuel consumption was tremendous. Pollution was also a concern. John discovered that these two sustainability issues could be addressed by utilizing state-of-the art technology such as more fuel-efficient engines; however, the cost may be prohibitive when upgrading Nishimura’s large transportation fleet.
John’s analysis determined that location selection could help reduce these sustainability concerns. Instead of focusing on either proximity to markets or suppliers, a more balanced assessment could significantly reduce fuel consumption and pollution. Examining the transportation needs from a long term perspective would enable a more efficient use of transportation options. The Council of Logistic defines logistics as “the process of planning the efficient, effective flow of goods from point of origin to point of consumption” Armed with this knowledge, John recognized that Nishimura must utilize all the tools of logistics management to address not only the best cost per shipment, but all the concerns associated with freight transportation, such as fuel consumption and pollution. Therefore, John planned to recommend that the location selection process include sustainability as a major factor. His recommendation would include factoring in fuel consumption and pollution to prove how, in the long term, location selection would reduce these issues.
Case Questions:
- Instead of focusing only on the best cost alternativefor their shipping, companies can use a combination of modes. What is the term that describes this action? What would be required to make it efficient and effective? Could this be a consideration for Nishimura?
- What are the supply chain environmental challenges in this case? What are some examples of tools, programs, or partnerships that Nishimura can use to enhance logistics sustainability?
- What are some issues with barge, rail, and trucktransportation systems that affect sustainability?
- Two common location analysis techniques are the weighted-factor rating technique and the center-of-gravity technique. Which technique would be best to use based on the argument that sustainability must be a major consideration? Why?
