Introduction
Contemporary organizations in the food industry, including food manufacturers, distributors and retailers are looking for the ways to incorporate sustainable processes and Corporate Social Responsibility (CSR) into the global and local supply chains. One of the critical elements of any operational activity is the logistics, which has a significant influence on the external urban and natural environment. Importantly, companies are becoming increasingly concerned with the negative impact of transport logistics and the levels of CO2 emissions in inbound and outbound logistics. This increasing awareness and focus of the companies on sustainable logistics practices is a result of the primarily pressure of the local governments, especially in developed states, but also growing awareness of these organizations about the positive impact of “green” logistics on Brand equity and image (Saddler, 2003).
Companies can address environmental challenges, built up by their logistics operations in a variety of ways. Some of the most common practices include the focus on optimization of their transport operations and packaging processes. These trends and the latest developments in the industry are the focus of this essay.
“Green” Trends in Logistics in Food Industry
Sustainable Packaging
For many food retail companies, such as supermarkets and restaurants, material costs often constitute up to 35% of the total cost of the final product. For manufacturing and distribution companies, combined upstream and downstream transportation costs account in many situations constitute up to 25% of the total unit cost (Mangan, Lalwali, and Butcher, 2008). Considering the above statistics, it is possible to argue that implementation of more efficient practices can benefit the companies not only by improving their relationships with the public and non-profit sector but also by having direct positive impact on the organizational bottom line. Companies benefit from reducing their packaging costs and optimizing the utilization of the transport vehicles used in upstream and downstream logistics. These processes underpin the major contemporary trends in environmentally-friendly logistics operations in the food industry (Coyle, 2013).
Sustainable Packaging
Sustainable packaging in transport and products is one of the central elements of the food retailers and manufacturing companies to minimize their environmental footprint. The latest trends in the industry are the use of recycled material for food packaging, or the materials that can be fully or partially recycled after the first use. Additionally, the environmentally-friendly packaging is often seen by the companies as the packaging comprised of the material which demands the minimal use of natural resources and greenhouse emissions as well as presents fewer disability concerns (Mangan, Lalwali, and Butcher, 2008). Some of the latest developments include pallet transportation, tank containers using recycled material and recycled product packages, such as the ones used by Starbucks Coffee Company, The Walmart and other innovative organizations (Nidomolu et al, 2009). Importantly, the implementation of sustainable practices in packaging comes with its challenges. These challenges are mostly related to the effectiveness and safety of such materials, especially for refrigerated and perishable goods. Companies continue struggling to find a healthy balance between adopting sustainable practices and comply with ethical and legal regulations and ensuring the most effective approach to transportation safety and quality of the final products (Keller and Horn, 2003). With that, an introduction of sustainable packaging can often result in increased short-term material costs. Optimization of the packaging for sustainable standards means both, higher demand for incremental innovation and a stronger focus on the alternative way of cost reduction in logistics. Ultimately, the goal of logistics is to reduce operational costs and the companies will continue to focus on Research and Development (R&D) in packaging, which can simultaneously address the cost and CSR-element in transportation and product packaging.
Choice of Vehicles and Utilization
Another important trend in the industry is the “green” transport logistics, where companies seek for the ways to reduce their CO2 gas emissions and the overall footprint on the environment. This area is concerned with reaching an adequate balance between environmental performance and the traditional purpose of logistics – cost reduction. In contrary to the packaging, "green" transportation can have more direct influence on the cost as it encourages the companies to optimize their operations from the perspective of (1) transport utilization, (2) use of more efficient fuels and vehicles, (3) slot sharing for inland and sea transportation. Some of the most recent trends in the area include the slot and vehicle sharing by various companies to reduce their cost of transportation. By doing so these companies manage to increase the utilization of the ships and inland transport systems and reduce their footprint overall. Additionally, many companies start to prefer biofuels and purchase vehicles, which can complement or substitute their fleet with more effective and efficient transport solutions. Finally, it is a common practice to outsource the logistics operations as the non-core activity. This has been done by many large organizations, including Tesco, Walmart, and other food retailers. This practice enables bringing scope and scale to the logistics operations of the third-party logistics providers, who are more experienced in the area and can focus on investment in "green" solutions. This approach to environmentally-friendly practices constitutes the "coopetition" practices in the food industry (Yami et al, 2010).
Conclusion
Food manufacturers, distributors, and retailers are under constant pressure to adopt more environmentally-friendly practices in their logistics operations. The ultimate purpose of logistics is to reduce the overall operational cost of the final product. It is evident that packaging and transportation are the key elements of the “green supply chain”. While it is possible to observe some challenges, which companies face in view of CSR-thinking, it is possible to conclude that the implementation of these practices can result in significant direct benefits for the organization. Development of sustainable packaging comes with the difficulties in finding the balance between the environmental footprint and safety and quality of the final product. The interest and concern of consumers with “green product and service”, however, outweigh this challenge and encourage companies to pursue R&D in this area. Transport logistics trends, at the same time, have direct positive impact on an organizational bottom line, as they help to reduce per slot and unit cost.
References
Keller, M. & Horn P. (2003). Strategic Management. 2nd Edition. Journal of Literature, 12(5), pp.66-89.
Sadler Ph., (2003). Strategic Management. 2nd Edition. London: Kogan Page Limited
Mangan J., Lalwani Ch., and Butcher T. (2008). Global Logistics and Supply Chain Management. London: John Willey & Sons.
Coyle J., Langley J., Novack R.A. and Gibson B. (2013). Supply Chain Management: A Logistics Perspective. Mason: Cengage Publishing.
Yami, S., Castaldo, S., Dagnino, B., and Le Roy, F, (2010). Coopetition: Winning Strategies for the 21st Century. Northhampton: Edwar Elgar.
