Centralisation of Distribution Systems and its Environmental Effects

Abstract: Many believe that the current application of modern logistics solutions in general and centralisation of distribution systems in particular is damaging from an environmental perspective. The reason for this claim is that when a distribution system is centralised, products need to be shipped over greater distances. This causes an increase in transport work, which in turn is believed to cause an increase in emissions. Further, the decision to centralise distribution can be characterised as a structural decision and earlier research has helped illustrate how such decisions have greater impact on the overall performance of a distribution system than decisions taken at subsequent levels (tactical and operative). The reason for this is that structural decisions help create new opportunities to make other logistical decisions that are beneficial for the performance of a distribution system, as measured in terms of costs and service.It is also acknowledged that there is a lack of research illustrating the actual environmental effects of centralisation. This area is the theme of this thesis and the overall purpose is to describe and analyse how centralisation of a distribution system can affect the environment. This purpose has been divided into two research questions, where the first one reads:- How does physical centralisation of a distribution system influence the environment?This question aims at investigating what effect centralisation has on the amount of emissions that are caused by transport in a distribution system. One of the main advantages with a centralised distribution system is that emergency deliveries are expected to decrease. This type of transport is often performed by airfreight, which is a mode of transport that is regarded to cause the largest amount of environmental stress among the four most commonly used transport modes. The argument that is made is that even though centralisation causes an increase in transport work, this must not necessarily mean that emissions increase.As indicated above, earlier studies on structural changes in distribution systems have shown that this type of decision creates new opportunities to make other decisions that are beneficial for the performance of a distribution system, albeit in terms of costs and service. The aim of the second research question is consequently to study this issue, but from an environmental perspective. This question therefore reads:- How do structural decisions in logistics create new opportunities to improve on the environmental performance of a distribution system?The results of the study show that it is not sufficient to only consider transport work and emergency deliveries when the environmental effect of a centralisation is to be evaluated. It has also been concluded that centralisation creates an opportunity to make improvements within the distribution system that can prove beneficial from an environmental perspective. In summary, three characteristics besides transport work and emergency deliveries were identified as being of importance when considering the environmental effects of a centralisation. These included centralised flow, modal change, and bargaining power.This model (see full pdf) does not aim to include all characteristics that can be relevant in an environmental evaluation of a centralisation, but rather those that have been found significant in this study. However, the model helps illustrate that there are many aspects that need to be considered in such an evaluation and that depending on the characteristics of the distribution system at hand the results can vary quite extensively.