The economic and environmental performance of distribution networks: A case study from the petrochemical industry

Designing a company's distribution network is a challenging task that requires the consideration of different aspects. In this respect, especially trade-offs between, for example, operational costs and customer service are the focus of the companies' attention. However, growing concerns of governments and customers about environmental protection have raised awareness towards the environmental impact of operations. Activities associated with the distribution of products, i.e. transportation and warehousing, are not yet subject to strict environmental regulations, but this situation is expected to change soon. Companies must, therefore, start to concentrate not only on economic but also on environmental aspects in the design of their supply chain. Based on a case study from the petrochemical industry, this paper presents a way to combine both, economic as well as environmental criteria, when evaluating (strategic) distribution network design decisions. The results show a trade-off between total (distribution) costs and transport carbon emissions. (author's abstract

A newsvendor model with service and loss constraints

Actual performance measurement systems do not only consider financial measures like costs and profits but also non-financial indicators with respect customer service, quality and flexibility. Using the newsvendor model we explore the influence of possibly conflicting performance measures on important operations decisions like the order quantity and the selling price of a product. For price-independent as well as price-dependent demand distribution like in the classical newsvendor model the objective is to maximise the expected profit. But the optimal decisions are computed with respect to a service constraint - a lower bound for the level of product availability - and to a loss constraint - an upper bound for the probability of resulting in loss. For the price-independent model a condition for the existence of an optimal order quantity and its structure is presented. For the price-setting newsvendor the admissible region of the order quantity and the selling price is characterised for the additive and the multiplicative model. Furthermore, it is shown that higher variability of demand leads to a smaller admissible region of the decision variables thereby easing the computation of the optimal decisions.Constrained Newsvendor Model, Price-Setting Newsvendor

Performance Measurement for Inventory Models with Risk Preferences

In financial economics in general the objective function expresses the risk preferences of the decision maker, see for example the mean variance approach in portfolio theory. Only recently in inventory management instead of maximizing expected profit or minimizing expected cost risk-averse objective functions have been used for determining the optimal order quantity. Examples are the exponential utility function and the conditional value at risk criterion. We use the well-known newsvendor model to determine the optimal performance measures for an objective function with two risk parameters, which can describe risk neutral, risk averse as well as risk taking behaviour of the inventory manager. We provide for this approach a complete characterization with respect to the performance measures expected profit and service level. We show that a risk averse inventory manager can not dominate a risk neutral or a risk taking inventory manager. Finally, we provide a managerial guideline for selecting the appropriate risk parameters of the objective function.Performance Measurement, Risk Preferences, Newsvendor Model

Facility location decisions with environmental considerations. A case study from the petrochemical industry

The recently growing concerns of customers and governments about environmental protection and greenhouse gas reduction have forced companies to integrate the topic of environmental sustainability into their decision making. Facility location decisions are of special relevance in this respect because of their strategic nature. Furthermore, many different trade-offs must be considered, for example between operational costs and customer service. But as soon as environmental issues are concerned, other critical issues must be considered as well. Based on a case study from the petrochemical industry, this paper extends two basic facility location models and shows the impact of distribution network-design decisions on the economic and environmental performance of the company. The results show a trade-off between total (distribution) costs and transport carbon emissions. (authors' abstract

Sustainable sourcing of strategic raw materials by integrating recycled materials

In this paper we investigate a manufacturer's sustainable sourcing strategy that includes recycled materials. To produce a short life-cycle electronic good, strategic raw materials can be bought from virgin material suppliers in advance of the season and via emergency shipments, as well as from a recycler. Hence, we take into account virgin and recycled materials from different sources simultaneously. Recycling makes it possible to integrate raw materials out of steadily increasing waste streams back into production processes. Considering stochastic prices for recycled materials, stochastic supply quantities from the recycler and stochastic demand as well as their potential dependencies, we develop a single-period inventory model to derive the order quantities for virgin and recycled raw materials to determine the related costs and to evaluate the effectiveness of the sourcing strategy. We provide managerial insights into the benefits of such a green sourcing approach with recycling and compare this strategy to standard sourcing without recycling. We conduct a full factorial design and a detailed numerical sensitivity analysis on the key input parameters to evaluate the cost savings potential. Furthermore, we consider the effects of correlations between the stochastic parameters. Green sourcing is especially beneficial in terms of cost savings for high demand variability, high prices of virgin raw material and low expected recycling prices as well as for increasing standard deviation of the recycling price. Besides these advantages it also contributes to environmental sustainability as, compared to sourcing without recycling, it reduces the total quantity ordered and, hence, emissions are reduced

Optimierungspotenziale in der petrochemischen Industrie

Die Prozesse und Aktivitäten der petrochemischen Industrie bieten aufgrund ihrer Vielfalt und Komplexität meist ein großes Potenzial für Verbesserungen. In diesem Beitrag sollen anhand kurzer Fallbeispiele, die in Kooperation mit OMV entstanden sind, drei solcher Optimierungspotenziale beispielhaft aufgezeigt werden. Dabei wird der Fokus auf die Downstream-Logistik gelegt und die Distribution der raffinierten Endprodukte zu den Endkunden (Tankstellen) analysiert. Auf strategischer Planungsebene werden die optimalen Standorte von Tanklägem bestimmt und die ökonomische und ökologische Performance verschiedener Netzwerk-Designs verglichen. In einem Fallbeispiel zur taktischen Planung wird ein Optimierungsmodell zur Planung der Transportmengen in einem Distributionsnetzwerk mit stochastischer Nachfrage dargestellt. Die effiziente Tourenplanung von den Lkw zu den Tankstellen stellt schlussendlich ein operatives Planungsbeispiel dar

Citylogistik und intermodaler Transport als Unterstützer grüner Logistik

Logistik ist ein wichtiger Eckpfeiler der Wirtschaft, ist aber mit sehr starken negativen Auswirkungen für die Umwelt verbunden. Innovative Ideen, die die negativen ökologischen Auswirkungen der Logistik reduzieren und gleichzeitig die wirtschaftlich notwendige Gestaltung der Logistik ermöglichen, sind essenziell. In diesem Artikel werden zwei Ansätze beschrieben, wie Logistik nachhaltiger gestaltet werden kann. Auf der einen Seite wird über Citylogistik berichtet, auf der anderen Seite werden die Besonderheiten des intermodalen Verkehrs analysiert. Anschließend werden Projekte, die in letzter Zeit zu diesem Thema abgeschlossen wurden, vorgestellt. Dabei wird ein besonderer Fokus auf die Rolle quantitativer Modelle gelegt

Green intermodal freight transportation: bi-objective modeling and analysis

Efficient planning of freight transportation requires a comprehensive look at wide range of factors in the operation and management of any transportation mode to achieve safe, fast, and environmentally suitable movement of goods. In this regard, a combination of transportation modes offers flexible and environmentally friendly alternatives to transport high volumes of goods over long distances. In order to reflect the advantages of each transportation mode, it is the challenge to develop models and algorithms in Transport Management System software packages. This paper discusses the principles of green logistics required in designing such models and algorithms which truly represent multiple modes and their characteristics. Thus, this research provides a unique practical contribution to green logistics literature by advancing our understanding of the multi-objective planning in intermodal freight transportation. Analysis based on a case study from hinterland intermodal transportation in Europe is therefore intended to make contributions to the literature about the potential benefits from combining economic and environmental criteria in transportation planning. An insight derived from the experiments conducted shows that there is no need to greatly compromise on transportation costs in order to achieve a significant reduction in carbon-related emissions

Hybrid simulation and optimization approach for green intermodal transportation problem with travel time uncertainty

The increasing volumes of road transportation contribute to congestion on road, which leads to delays and other negative impacts on the reliability of transportation. Moreover, transportation is one of the main contributors to the growth of carbon dioxide equivalent emissions, where the impact of road transportation is significant. Therefore, governmental organizations and private commercial companies are looking for greener transportation solutions to eliminate the negative externalities of road transportation. In this paper, we present a novel solution framework to support the operational-level decisions for intermodal transportation networks using a combination of an optimization model and simulation. The simulation model includes stochastic elements in form of uncertain travel times, whereas the optimization model represents a deterministic and linear multi-commodity service network design formulation. The intermodal transportation plan can be optimized according to different objectives, including costs, time and CO2e emissions. The proposed approach is successfully implemented to real-life scenarios where differences in transportation plans for alternative objectives are presented. The solutions for transportation networks with up to 250 services and 20 orders show that the approach is capable of delivering reliable solutions and identifying possible disruptions and alternatives for adapting the unreliable transportation plans