For each supply chain there will be an ideal number of warehouse locations. This will be determined by the proportion of inventory, storage, and transport costs. The graph below outlines this relationship. It can be seen that by combining these costs there is an optimal number of warehouse locations that result in the minimum total distribution costs:

Let us now consider the immediate environmental effects. High energy usage in the supply chain is at the top of the list. Whereas there are a number of alternative sources to generate energy and use it efficiently within warehouses and distribution centres, transport is currently almost entirely dependant on the availability and price of oil. As we know this is rising significantly, and forecasts are that this will continue. The affect of this on total distribution costs is that transport or delivery costs will become a larger proportion of the total, causing the optimum number of warehouses to increase and be closer to the points of demand. This is shown in the graph below:

The rise in transport costs is also likely to affect larger supply chains- those that serve the total European markets. If we consider the trend with the major food manufacturers to produce fewer products at larger sites in Europe and Eastern Europe, and then ship all products to individual country markets, we can see that rising transport costs also affect the balance of these total supply chain costs. This is not to say that these will be the only effects on the environmental aspects of supply chains. Rising fuel costs could also generate better vehicle fills in larger vehicles. However, this could conceivably lead to fewer deliveries, more stock and a reduction in customer service levels.

Each supply chain will have its own set of design criteria that influence the minimum distribution costs, but it is clear that the balance of these is changing and new criteria are being introduced as a result of environmental changes.

Why use The Logistics Business Environmental Audit Programme?

• We are industry experts in green logistics for supply chain, warehouse and transport
• We provide recommendations and improvements based on proven techniques
• We provide clear definitions of environmental and financial savings
• Projects are undertaken by specialist consultants who have a detailed understanding of environmental logistics